JPMorgan Cuts 2009 Gas Forecast 5.2% on Weak Economy (Update2)

Jan. 23 (Bloomberg) -- JPMorgan Chase & Co. cut its 2009 price outlook for natural gas futures by 5.2 percent as a deepening recession in the U.S., Europe and Asia slices demand.

Gas will average $5.69 per million British thermal units on the New York Mercantile Exchange this year, down from a forecast of $6 on Dec. 17, according to a report from Scott Speaker, JPMorgan’s natural gas strategist in New York. Prices will rebound to average $6.63 in 2010.

“It has become clearer in the past month that severe manufacturing weakness will have an impact on natural gas demand that goes beyond a brief hiccup or temporary condition simply needing some producer-driven tightening,” Speaker said in the report.

Natural gas for February delivery fell 16.3 cents, or 3.5 percent, to $4.518 per million Btu on the New York exchange, the lowest closing price since Sept. 27, 2006. Prices have dropped 20 percent this year (asr: 2009? wow 23 days in JAN drop of 20% seems people saw the coming low demand from industry )

Consumption of gas to run factories and produce chemicals is falling as companies shut plants and fire workers. The number of Americans filing their first unemployment-benefit claims matched a 26-year high, the U.S. government said yesterday. Industrial users account for about 29 percent of U.S. gas demand.

Initial jobless claims increased by 62,000 to 589,000, more than forecast, in the week ended Jan. 17, from a revised 527,000 the prior week, the Labor Department said in a report.

Weaker Demand

Demand from chemical makers and other large consumers of gas may fall 3 percent in 2009, the Energy Department said in a report on Jan. 13.
asr: see energy dept. said on Jan 13, 10 days before of this Jan 23 , if somebody pays attention to dept.

“Our lower 2009 price forecasts reflect the stagnant demand level and prolific domestic supply situation,” Speaker said.

Gas output in 2008 gained an estimated 5.9 percent, the Energy Department said in its Short-Term Energy Outlook released last week. That expansion of supply became available as the recession gained momentum in the U.S.

“In assessing the current fundamentals and the balance going forward, the crosshairs are being established on the intersection between the production impact of a lower rig count and any perceived recovery in non-weather-related demand,” he said.

Producers have begun to shut down rigs, which may boost gas prices in 2010, Speaker said.

There were 1,185 gas rigs operating in the U.S. for the week ended today, down from 1,606 in the week ended Sept. 12, the highest since at least July 1987, according to Baker Hughes Inc.

To contact the reporter on this story: Reg Curren in Calgary at rcurren@bloomberg.net.