U.S. Natural Gas May Top Record on Freezing Weather, Poll Shows
U.S. Natural Gas May Top Record on Freezing Weather, Poll Shows
Dec. 5 (Bloomberg) -- Natural gas in New York may touch an all-time high as the coldest weather so far this winter drives demand for the furnace fuel, a Bloomberg survey showed.
Ten of 16 traders and analysts, or 63 percent, said New York Mercantile Exchange gas futures will rise this week, according to the survey on Dec. 2. Five said prices will fall and one respondent predicted little change.
Forecasters said frigid weather will reach from the northern Plains to the Mid-Atlantic, fueling demand from households and businesses that heat with gas. The coldest air will be in the Great Lakes, northern Midwest and northern Plains through the middle of the week, meteorologists said.
``The onset of colder-than-average weather could help to push prices to new highs,' said Agbeli Ameko, a managing director with First Enercast Financial, an energy-trading adviser in Denver. ``There has been forecast-to-forecast consistency among the National Weather Service and private shops -- all suggesting a colder outlook.'
Benchmark gas futures rose 16 percent last week, the biggest weekly gain since September. The prior survey, conducted on Nov. 24, ahead of the four-day Thanksgiving weekend, predicted a gain. The Bloomberg survey has correctly predicted the direction of gas prices in seven of the past 10 weeks.
Gas for January delivery ended last week at $13.931 per million British thermal units, the highest since Oct. 26. That's just 41 cents shy of the $14.338 record close set on Oct. 25. The intraday peak was $14.75 on Oct. 5.
Arctic Air
A high pressure system stretching across Canada is funneling arctic air to the central and eastern portions of the U.S., said Jim Rouiller, senior meteorologist at Wayne, Pennsylvania-based forecaster Planalytics Inc.
``This steering flow will continue to act as a pipeline for the delivery of arctic air from northwestern reaches of Canada southeastward into a large portion of the country east of the Rockies,' Rouiller said on Dec. 2.
The colder weather follows a mild November during which gas stockpiles approached record levels. Utilities, manufacturers and gas-storage companies stow the fuel from April to November to supplement pipeline supplies during winter.
U.S. inventories reached 3.282 trillion cubic feet in the week ended Nov. 11. That's the second highest level for start- of-winter storage, based on data from the Energy Department that goes back to 1994. Supplies have dropped by 57 billion cubic feet in the two weeks since, taking stocks to 3.225 trillion, or 2.3 percent below the same time last year.
Chicago will see low temperatures around 16 Fahrenheit (minus 9 Celsius) in the first four days of this week, according to the National Weather Service. The normal low is 24 degrees this time of the year.
Gulf Production
Bullish respondents to the survey also pointed to production losses in the Gulf of Mexico, which persist two months after Hurricanes Katrina and Rita shut down offshore production platforms and exploration rigs.
Gulf gas output was still 29 percent below the normal level of 10 billion cubic feet a day, according to the Minerals Management Service. A total of 501 billion cubic feet of gas has been lost since August, prompting some analysts to say that the onset of colder weather takes on added importance.
``There is a great concern that the hurricanes have reduced productive capacity,' said Bill O'Grady, an analyst with A.G. Edwards & Sons Inc. in St. Louis. ``As long as the weather was mild, it wasn't a big issue. When the weather gets cold, the demand is going to go up into a market that simply can't create a lot of supply.'
`They Had Their Chance'
Prices rose through a key resistance level when they moved past $13.92 last week, according to Walter Zimmermann, a technical analyst at United Energy Inc. in Jersey City, New Jersey, who reads price graphs and volume charts for clues to trends in the marketplace. Closing above that level signals new highs are probable, he said.
The $13.92 price was identified using a Fibonacci chart, a system of analysis based on the theory that prices rise or fall by specific percentages after reaching a high or low. That price is 78 percent of the difference between the peak of $14.75 on Oct. 5 and the low of $10.88 on Nov. 28.
Bearish poll respondents said the move higher wasn't justified by the cold weather, and pointed to supplies that are 6.3 percent above the average for the past five years.
``It's an overreaction,' said Tom Langan, chief executive of WTL Trading Inc. in Cypress, California, near Los Angeles. ``It better be really cold. Otherwise, you'll see some guys coming in and selling it.'
January is the peak month for U.S. household-gas demand, according to the Energy Department. The Midwest and Northeast combine to account for 60 percent of U.S. natural gas demand, the department said.
Bloomberg's survey of natural-gas analysts and traders, conducted on Fridays, 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:
RISE FALL NEUTRAL 10 5 1
To contact the reporter on this story: Geoffrey Smith in New York at gsmith15@bloomberg.net.
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