London, 10 January 2012

BofA Merrill Lynch Global Commodity Research has sharply lowered their US natural gas price forecasts. While the strength in shale gas output has upset the supply demand balance in the US natural gas market for some time now, abnormally low heating demand this winter has further contributed to exacerbate the surplus - with November and December seeing the warmest winter weather in over 30 years.

BofA Merrill Lynch estimate that the unusually warm weather deducted 1.64 bcf/d of demand growth in 2011, relative to a normal winter. Thus, the new gas year has started with an incredible glut.

This is not just bearish for 2012 but also for 2013. As a result, BofA Merrill Lynch have cut their price forecasts for US natural gas significantly. For 2012, they now expect prices to average $3.30/MMBtu, from $4.30/MMBtu prior. BofA Merrill Lynch only see a small recovery in prices in 2013 when they expect prices to average $3.80/MMBtu, from $4.70/MMBtu prior.

This week, Goldman Sachs also revised lower their 2012 NYMEX natural gas price forecast to $3.10/mmBtu; maintaining their 2013 forecast at $4.25/mmBtu.

Ends --

Commodities Now