Goldman Sachs Group Inc. raised its forecast for U.S. natural gas futures for the remainder of this year on a “tightening shift” in market fundamentals after temperatures fell last month.
Futures in New York will average $4.40 per million British thermal units for the balance of 2013, Goldman said in a report e-mailed today. That’s a 17 percent increase from its previous forecast of $3.75. Cold weather in the U.S. reduced inventories to 1.7 trillion cubic feet at the end of last month, from 2.5 trillion a year ago, according to the bank.
“We believe the need for more production and less need for coal-to-gas switching will allow prices to move higher,” said Johan Spetz, a commodity analyst at Goldman in New York. “A return to growing production is required to balance the market after this summer.”
Benchmark natural gas futures on the New York Mercantile Exchange climbed 15 percent in March, the most in half a year, as cold weather increased demand and drained stockpiles in the U.S. The contract for May delivery was at $3.96 per million British thermal units, up 0.3 percent, in electronic trading on Nymex today.
Goldman also opened a trading recommendation to buy call options on gas for November 2013 at $4.20 per million British thermal units. The bank maintained its forecast for 2014 at $4.25, citing a possible increase in supply.
“We believe prices are likely to face resistance above $4.25 in the near term as coal-to-gas switching is still needed to balance the market,” Spetz said. “Net, we expect U.S. natural gas production to be flat year-on-year in 2013 before returning to close to 2 billion cubic feet a day growth in 2014 year-on-year.”