Natural Gas May Drop as Nor’easter Gives Way to Mild Weather

Natural gas futures may slide next week on speculation that milder weather in the eastern U.S. will follow a snowstorm heading into this weekend.

Six of 12 analysts in a Bloomberg survey, or 50 percent, said futures will decline on the New York Mercantile Exchange through Feb. 15. Five, or 42 percent, predicted gas will rise and one said prices will stay the same. Last week, 57 percent of participants said gas would decrease this week.

The winter storm in the Northeast will give way to above-normal temperatures over the next six to 10 days, MDA Weather Services in Gaithersburg, Maryland said. Gas prices fell 3.9 percent yesterday after a government report showed a U.S. stockpile decline last week that was below analyst forecasts. A supply drop a week earlier was also below expectations.

“We had a pretty strong selloff in response to the second disappointing draw,” said Aaron Calder, senior market analyst at Gelber & Associates in Houston. “There is going to be another small draw next week because temperatures were even warmer than last week.”

Natural gas fell 2.9 cents, or 0.9 percent, to $3.272 per million British thermal units this week in New York. The futures are up 34 percent from a year ago.

Forecasts showing a return to colder weather in the second half of February may give bullish investors a chance to push prices higher, Calder said.

Supply Report

U.S. inventories fell by 118 billion cubic feet to 2.684 trillion in the week ended Feb. 1, below the five-year average drop of 165 billion for the period, the Energy Information Administration said yesterday. Analyst estimates compiled by Bloomberg showed a decline of 127 billion.

A supply surplus to the five-year average expanded to 15 percent from 12.2 percent the previous week, the most since the week ended July 20, EIA data show. A deficit versus year-earlier levels widened to 7.8 percent from 6.7 percent, the most since July 1, 2011. The previous winter was the fourth-warmest on record in the lower 48 states, crimping heating-fuel demand.

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      6      1
Before it's here, it's on the Bloomberg Terminal.