Forexpros – Natural gas futures rose sharply in thin post-holiday trade on Friday, jumping to a two-week high as cooling weather forecasts and indications of a slowdown in U.S. production boosted prices.
On the New York Mercantile Exchange, natural gas futures for delivery in January settled at USD3.662 per million British thermal units by close of trade on Friday, rallying 4.4% over the week, the first weekly gain in four.
Earlier in the day, prices rose by as much as 2.5% to hit USD3.675 per million British thermal units, the highest since November 10.
The recent bout of mild U.S. weather, which has kept prices depressed near 13-month lows in recent sessions, was beginning to give way to cooler temperatures across most parts of the U.S.
The Commodity Weather Group said Friday that temperatures in the U.S. Midwest and Southern states were forecast to be colder-than-normal from November 30 to December 4.
The weather group added that current weather models showed “a marginal cold-dominated pattern for the Midwest, East and South” during the first third of December.
Meanwhile, private forecaster WSI Energycast said its six-to-10-day forecast is “a shade colder over the most of the central and eastern U.S.” compared with its Wednesday forecast.
Colder-than-normal winter temperatures increase the need for gas-fired electricity to heat homes, boosting demand for natural gas.
Gas prices continued to draw support from Wednesday’s U.S. storage data, which showed a smaller-than-expected increase in natural gas stockpiles.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. rose by 9 billion cubic feet in the week ended November 18, after increasing by a downwardly revised 12 billion cubic feet in the preceding week. Analysts had expected U.S. natural gas storage to rise by 17 billion cubic feet.
Total U.S. natural gas storage stood at 3.852 trillion cubic feet as of last week, just shy of the all-time high of 3.867 hit in early November.
The report was issued a day early due to the US Thanksgiving holiday on Thursday.
Also Wednesday, industry research group Baker Hughes said that the number of active rigs drilling for natural gas in the U.S. last week fell to the lowest level since January 2010, declining by six to stand at 865 rigs.
Natural gas traders closely watch the rig count to gauge future supply growth. The rig count has dropped sharply from a nine-and-a-half month high of 936 hit just six weeks ago, but the current level of activity is still widely expected to lead to further production gains.
A drop to the 800-rig-level would be necessary to begin to balance the market, according to Baker Hughes.
Despite the weekly gain, global financial service provider Barclays expected prices to remain under pressure, citing a U.S. supply glut.
“With inventory levels at record levels, even a cold winter would not put the U.S. gas market on a bullish path,” the lender said in a report.
Elsewhere on the Nymex, light sweet crude oil futures for January delivery traded at USD97.36 a barrel by close of trade on Friday, edging 0.21% higher on the week, while heating oil for December delivery dropped 3.35% over the week to trade at USD2.939 per gallon by close of trade Friday.
Forexpros
