Natural Gas Falls in Survey on Outlook for Mild August WeatherNaureen S. Malik
Natural gas futures may decline next week on forecasts for unusually mild weather heading into mid-August that would pare demand from power plants, a Bloomberg survey showed.
Six of 11 analysts, or 55 percent, predicted that futures will fall on the New York Mercantile Exchange through Aug. 9. Three, or 27 percent, said gas will stay the same and two predicted prices will advance. Last week, 50 percent of participants said gas would drop.
Temperatures will be below normal from the East Coast to the Great Plains through Aug. 15, according to MDA Weather Services in Gaithersburg, Maryland. Gas prices fell to a five-month low yesterday, nearly wiping out this year’s gains, after the government reported a U.S. stockpile increase for last week that topped analyst estimates.
“I think the market continues to grind lower,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The break below $3.50 suggests that the market is hunting for the bottom. With the weather forecast in the coming week and early calls to see a pretty sizeable injection, the following week isn’t going to be very strong.”
Natural gas futures plummeted 16.8 cents, or 4.7 percent, to $3.387 per million British thermal units during the first four days of this week on the Nymex. The futures are up 1.1 percent this year after gaining as much as 33 percent when prices touched a 21-month high of $4.444 on May 1.
“The composite weather forecasts for the first half of August are tracking just inside the bottom 10 observations since 1950,” said Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York. Without a change in weather, prices will trade “within a relatively tight band of $3.25 to $3.50.”
The high temperature in Philadelphia on Aug. 5 will be 81 degrees Fahrenheit, (27 Celsius) 5 below normal, Four days later the reading in Kansas City, Missouri, may be 13 lower than the average high at 77 degrees.
Power plants will account for 32 percent of U.S. gas consumption this year and are the biggest users of the fuel, according to the Energy Information Administration, the Energy Department’s statistical arm.
Gas inventories expanded by 59 billion cubic feet to 2.845 trillion in the week ended July 26, above the five-year average gain for the period of 47 billion, according to an EIA report yesterday. Analyst estimates compiled by Bloomberg showed an increase of 55 billion.
A deficit to the five-year average narrowed 1.2 percent from 1.6 percent the previous week. Supplies were 11.5 percent below levels a year earlier versus 12.5 percent a week earlier.
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 gas futures will probably rise, fall or remain neutral in the coming week. This week’s results were:
RISE FALL NEUTRAL
2 6 3