Forexpros – Natural gas futures were up for the first time in eight trading session during U.S. morning hours on Monday, as forecasts for warmer weather across key parts of the U.S. boosted near-term demand expectations for the fuel.
On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.393 per million British thermal units during U.S. morning trade, jumping 2.9%.
It earlier rose by as much as 3.3% to trade at a session high of USD2.409 per million British thermal units. Prices touched USD2.314 on Friday, the lowest since May 8.
Natural gas futures recovered from Friday’s almost 4% plunge, as warmer weather forecasts across most parts of the U.S. in the coming week provided support.
The National Weather Service’s six- to 10-day outlook issued on Sunday called for above-normal readings for much of the U.S., with below-normal readings in Florida and in the Northwest.
Warmer-than-normal temperatures increase the need for gas-fired electricity to to power air conditioning, boosting demand for natural gas. Natural gas accounts for about a quarter of U.S. electricity generation.
Indications that U.S. gas producers were cutting back on production in response to lower prices also contributed to gains.
Industry research group Baker Hughes said on Friday that the number of active rigs drilling for natural gas in the U.S. last week fell by six to 588, the lowest in 12 years.
The gas rig count is more than 35% below last year’s level, fuelling hopes that major North American natural gas producers were beginning to curb output in response to declining prices.
Some short-covering provided further support, as traders closed out bets on lower prices after futures moved into oversold territory.
Natural gas prices have been on the decline since touching a three-month high of USD2.820 on May 21. Front-month gas future contracts on the NYMEX have fallen in each of the past seven sessions leading up to Monday, losing approximately 17.5%.
Technical traders attributed the downward movement to a shaky technical chart outlook, after the market failed to break above key resistance close to USD2.820 a number of times.
Despite the recent run of losses, natural gas prices are still up 18% since touching a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production.
Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent weeks.
However, market players noted that sustained prices back above USD2.50 and toward the USD3.00-level likely would inspire some switching back to coal.
Meanwhile, traders remained concerned over elevated U.S. storage levels. The U.S. Energy Information Administration said last week that natural gas storage in the U.S. rose by 71 billion cubic feet 2.815 trillion cubic feet last week, 35% above both last year and the five-year-average level for this week.
Early injection estimates for this week’s storage data range from 45 billion cubic feet to 80 billion cubic feet, compared to last year’s build of 81 billion cubic feet. The five-year average change for the week is an increase of 99 billion cubic feet.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in July added 0.3% to trade at USD83.48 a barrel, while heating oil for July delivery dipped 0.2% to trade at USD2.622 per gallon.
Forexpros
