Natural gas futures hit 2-week high on cold weather forecasts

Investing.com - Natural gas futures extended strong gains from the previous session to hit a two-week high during U.S. morning trade on Monday, as forecasts showing colder weather in the coming week boosted near-term demand expectations for the heating fuel.

Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting forecasts on winter heating demand.

On the New York Mercantile Exchange, natural gas futures for delivery in February traded at USD3.398 per million British thermal units during U.S. morning trade, up 2.15% on the day.       

It earlier rose by as much as 2.3% to trade at a session high of USD3.404 per million British thermal units, the strongest level since December 31.

Natural gas future prices rallied more than 4% Friday after weather forecasts showed that colder-than-normal temperatures were expected across key parts of the U.S. later in January and into early-February, boosting sentiment on the heating fuel.

Weather service provider MDA Weather said that it expected temperatures to fall below normal in the Northeast and Great Lakes-region of the U.S. from January 21 through January 25.

Weather forecaster AccuWeather expected temperatures in New York to fall to 22 degrees Fahrenheit (minus 6 Celsius) on January 21, five degrees lower than usual.

Forecasts originally called for mild winter weather during the period. Bullish speculators are betting on the cool weather increasing winter demand for the heating fuel.

The heating season from November through March is the peak demand period for U.S. gas consumption. Nearly 50% of all U.S. households use gas for heating.

Meanwhile, last week’s larger-than-expected drawdown from winter inventories also kept momentum to the upside.

The U.S. Energy Information Administration said that natural gas storage in the U.S. in the week ended January 4 fell by 201 billion cubic feet, the most since February 2011.

Inventories fell by 95 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 149 billion cubic feet.

Total U.S. natural gas storage stood at 3.316 trillion cubic feet as of last week, 2.6% below last year’s level and 10.7% above the five-year average for this time of year.

Early withdrawal estimates for this Thursday’s storage data range from 100 billion cubic feet to 143 billion cubic feet.

Inventories fell by 89 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 144 billion cubic feet.

The heating fuel has lost nearly 15% since touching a 14-month high of USD4.001 per million British thermal units on November 26, on speculation that temperatures won’t be cold enough to erase a surplus of the fuel in storage.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in February shed 0.5% to trade at USD93.51 a barrel, while heating oil for February delivery added 0.5% to trade at USD3.025 per gallon.