Forexpros – Natural gas futures declined on Friday, surrendering nearly all the previous day’s gains as optimism over the first supply withdrawal of the heating season ebbed, with investors shifting their focus to mild weather that was expected to limit heating demand.
On the New York Mercantile Exchange, natural gas futures for delivery in January settled at USD3.583 per million British thermal units by close of trade on Friday, dropping 1.83% over the week.
Natural gas prices rallied nearly 2.8% on Thursday after the U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. fell by 1 billion cubic feet in the preceding week, confounding expectations for an increase of 9 billion cubic feet.
The report offered the first decline in natural gas inventories since April indicated that declining temperatures ahead of winter’s peak gas-heating-demand period may be starting to affect the market.
Total U.S. natural gas storage stood at 3.851 trillion cubic feet, hovering below late November’s all-time high of 3.852 trillion cubic feet. Stockpiles are 7.3% above the five-year average and 1.1% higher than the same period last year.
Historically, the last week in November is usually the week when the market flips from growing inventories to declining inventories, with winter weather driving up demand as people heat their homes.
However, prices have been under pressure in recent weeks as mild weather in key gas-consuming regions in the U.S. limited early-season heating demand.
Early injection estimates for next week’s storage data range from a buildup of 12 billion cubic feet to a drawdown of 34 billion cubic feet.
Gas futures slumped 1.8% on Friday after industry weather group MDA Federal said that it expected warmer-than-normal temperatures across parts of the U.S. Midwest and Northeast from December 8 to December 13.
The weather group added that it expected near-average seasonal temperatures for the eastern half of the U.S. during the second week of December, underlining the view that gas supplies are more than ample to meet U.S. winter-heating needs.
According to weather service provider AccuWeather, the high temperature in Chicago on December 4 will be 46 degrees Fahrenheit (8 Celsius), seven degrees above normal.
Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts for late November and early December on heating demand.
Above-normal winter temperatures reduce the need for gas-fired electricity to heat homes, dampening demand for natural gas.
Gas traders shrugged off a report from industry research group Baker Hughes on Friday showing that the number of active rigs drilling for natural gas in the U.S. fell by nine to hit a 22-month low of 856 in the preceding week.
Natural gas traders closely watch the rig count to gauge future supply growth. The rig count has fallen by 78 rigs, or 8.4%, in the last five weeks, but remains well above the 800-rig-level, which would be necessary to begin to balance the market, according to Baker Hughes.
Elsewhere on the NYMEX, light sweet crude oil futures for January delivery traded at USD101.11 a barrel by close of trade on Friday, climbing 3.43% on the week, while heating oil for January delivery rose 1.17% over the week to trade at USD2.990 per gallon by close of trade Friday.
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