Forexpros – Natural gas futures tumbled to a three-week low on Friday, as warmer-than-normal winter weather in the U.S. underlined the view that gas supplies are more than ample to meet U.S. winter-heating needs.
On the New York Mercantile Exchange, natural gas futures for delivery in January settled at USD3.337 per million British thermal units by close of trade on Friday, plunging 6.44% over the week. Futures fell to USD3.311 earlier in the day, the lowest since November 18, when prices dropped to a 13-month low.
Natural gas futures tumbled nearly 3.5% on Friday after the Commodity Weather Group forecast above average temperatures along most parts of the U.S. East Coast through mid-December.
The weather group said that it expected temperatures to be at least five degrees warmer-than-normal along the East Coast and about three degrees higher in interior regions, according to its 6-to-10-day outlook.
Weather service provider AccuWeather offered a similar outlook, saying it expected temperatures in the U.S. Northeast and Midwest, key gas-consuming regions, to mostly range from normal to slightly above normal next week.
Natural gas prices have closely tracked weather forecasts in recent weeks. Above-normal winter temperatures reduce the need for gas-fired electricity to heat homes, dampening demand for natural gas.
On Thursday, gas prices rallied to as high as USD3.533 after the U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. fell by 20 billion cubic feet in the preceding week, beating expectations for a decline of 10 billion cubic feet.
However, prices subsequently pared gains as the drawdown was significantly lower than usual for this time of year. Stocks declined by 79 billion cubic feet in the same week a year earlier, while the five-year average change is a withdrawal of 66 billion cubic feet.
Total U.S. natural gas storage stood at 3.831 trillion cubic feet as of last week, 8.7% above the five-year average of 3.524 trillion cubic feet for this time of year.
Early injection estimates for next week’s storage data range from a decline of 60 billion cubic feet to 92 billion cubic feet. The five-year average stockpile change for the week is a drop of 142 billion cubic feet, according to U.S. Energy Department data.
Gas futures typically climb during the winter months, as temperatures fall and demand for heating fueled by natural gas rises. But mild weather coupled with high production levels have kept prices depressed in recent weeks.
Earlier in the week, the U.S. EIA revised down its average natural gas price forecast for 2012 to USD3.70 per million British thermal units, compared to a previous estimate of USD4.13, citing rising natural gas supplies.
In its monthly Short-Term Energy Outlook published Tuesday, the EIA said it expected working gas in storage to end the winter season at a record high of 1.83 trillion cubic feet at the end of March 2012.
Elsewhere on the NYMEX, light sweet crude oil futures for January delivery traded at USD99.80 a barrel by close of trade on Friday, dropping 1.39% on the week, while heating oil for January delivery lost 2.57% over the week to settle at USD2.917 per gallon by close of trade Friday.
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