Thanks to colder-than-normal winter weather, which sucked up some excess natural gas supplies, Raymond James & Associates Inc. on Tuesday lifted 2011 gas price forecasts by 50 cents to $4.25/Mcf.

Analyst J. Marshall Adkins and his colleagues early this year had predicted 2011 gas prices would average $4.25 but cut the forecast because of strong production numbers.

“Even though U.S. gas supply has, in fact, grown at a record pace this year, increased weather-related gas demand has temporarily offset the supply growth,” wrote Adkins. “Between the U.S. and Canada, we estimate that colder than normal weather this past winter consumed 500 Bcf more gas (or 2.5 Bcf/d) than expected. Thanks to the weather, summer-ending gas storage may now end slightly below last year rather than oversupplied by more than 400 Bcf.”

The analysts said their 2011 gas price forecast went sideways despite a “huge” gas supply increase — which they estimate is more than 4 Bcf/d year/year to date.

“So, what did we miss? Simply put, it was extremely cold in North America,” said Adkins and his team. “We believe the frigid weather resulted in an extra 500 Bcf, or about 2.5 Bcf/d from November-May, of natural gas demand above and beyond normal weather and our estimates.”

According to Raymond James, winter weather accounted for an incremental 370 Bcf of demand in the United States and 130 Bcf of demand in Canada. U.S. gas storage closed the winter at 1.6 Tcf, which is “nearly 200 Bcf below our original 1.8 Tcf forecast.” Into April and May the extreme weather continued, which was quickly replaced by a record heat wave in June. “Thus far this summer we’ve experienced another 150 Bcf more weather than normal.”

However, 2012’s gas outlook “remains ugly,” said Adkins. Annual domestic gas supply growth of 4 Bcf/d, or 6%, “is now looking more and more like a floor than a ceiling.”

Raymond James’ 2012 gas storage model now “suggests 4.35 Tcf of summer-ending gas inventories. Unfortunately, we have less than 4 Tcf of storage capacity. That means gas prices will need to be low enough to encourage shut-ins or more coal-to-gas switching. Either way, it points to depressed gas prices next year.”

Next year’s gas prices are expected to average $4.25/Mcf, which is below consensus expectations of $5.33/Mcf for Henry Hub Bloomberg forecasts, and the New York Mercantile Exchange futures strip, which is $4.81. There also could be “more downside — as low as $3.50/Mcf — than upside to our 2012 gas price estimate.”

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