Natural Gas May Decline on Outlook for Milder U.S. Weather

Natural gas futures may fall next week on speculation that the weather won’t be cold enough to reduce a supply glut of the heating fuel.

Eight of 14 analysts in a Bloomberg survey, or 57 percent, said futures will decline on the New York Mercantile Exchange through Feb. 8. Five, or 36 percent, predicted gas will rise and one said prices will stay the same. Last week, 54 percent of participants said gas would advance this week.

Above-normal temperatures in the central U.S. next week may give way to colder weather in the second half of the 11- to 15-day forecast, according to Commodity Weather Group LLC in Bethesda, Maryland. A drop in U.S. stockpiles last week fell short of analysts’ expectations after frigid weather swept through the East.

“The forecast is still bearish until the middle of February, and March is forecasted to be warmer than normal,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The withdrawal next week is going to be below normal,” based on mild weather this week, he said.

Natural gas fell 14.3 cents, 4.2 percent, to $3.301 per million British thermal units this week in New York. The futures have dropped 1.5 percent this year.

The low in Chicago on Feb. 4 may be 26 degrees Fahrenheit (minus 3 Celsius), 7 above normal, according to AccuWeather Inc. in State College, Pennsylvania. New York City’s low may be 10 higher than the usual reading on Feb. 8 at 38 degrees. About 50 percent of U.S. households use gas for heating.

U.S. inventories declined by 194 billion cubic feet to 2.802 trillion in the week ended Jan. 25, the Energy Information Administration said yesterday. Analyst estimates compiled by Bloomberg showed an expected decline of 204 billion. The five-year average change for the week is a decrease of 178 billion.

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:

     5      8      1
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