Natural Gas May Drop on Outlook for Milder January Weather

Natural gas futures may decline next week on speculation that milder weather predicted for the end of January and a recent price rally will prompt electricity generators to burn more coal instead.

Eight of 12 analysts in a Bloomberg survey, or 67 percent, said futures will fall on the New York Mercantile Exchange through Jan. 25. Two, or 17 percent, said gas will rise and another two said prices will stay the same. Last week, 71 percent of participants said gas would retreat this week.

Temperatures may return to seasonal levels after a “bigger cold outbreak” from Maine to South Carolina and across the Midwest, according to Commodity Weather Group LLC in Gaithersburg, Maryland. Gas has gained 15 percent since dropping to a 15-week low on Jan. 9 as lower prices prompted electricity generators to burn more gas.

“Normal weather with this much gas in storage would be a reason for the bulls to lose momentum here,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston.

Natural gas advanced 23.9 cents, or 7.2 percent, to $3.566 per million British thermal units this week in New York, the highest settlement price since Dec. 6. Futures are up 44 percent from a year ago.

Temperature Outlook

The low temperature in New York City may be 35 degrees Fahrenheit (2 Celsius), on Jan. 31, 8 above normal, after slipping to 19 degrees, 8 below the usual reading, on Jan. 22, according to AccuWeather Inc. in State College, Pennsylvania. Chicago’s low will rise to 22 degrees, 4 above normal, from 13 degrees, 5 below normal, during the same period.

About 50 percent of U.S. households use gas for heating, Energy Department data show.

U.S. stockpiles declined by 148 billion cubic feet to 3.168 trillion in the week ended Jan. 11, the U.S. Energy Information Administration said yesterday. Supplies were 4.4 percent below year-earlier levels, the biggest deficit in 17 months, according to the statistical arm of the Energy Department.

The gas survey has correctly forecast the direction of prices 50 percent of the time since its June 2004 introduction.

     Bloomberg’s survey of natural-gas analysts and traders asks
for an assessment of whether Nymex natural-gas futures will
probably rise, fall or remain neutral in the coming week. This
week’s results were:

     2      8      2
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