Natural gas futures rally to 4-month peak on warm weather outlook

Investing.com - U.S. natural gas prices rose to the highest level in nearly four months on Tuesday, as forecasts continued to call for warm weather through late May, boosting near-term demand expectations for the heating fuel.

On the New York Mercantile Exchange, natural gas for delivery in June touched an intraday high of $3.098 per million British thermal units, the most since January 16, before paring gains to trade at $3.085 during U.S. morning hours, up 7.7 cents, or 2.54%.

A day earlier, natural gas prices dipped 0.6 cents, or 0.2%, to close at $3.010. Futures were likely to find support at $2.978 per million British thermal units, the low from May 18, and resistance at $3.177, the high from January 16.

Updated weather forecasting models pointed to hotter-than-normal temperatures on the East Coast through May 29, boosting early summer cooling demand for the fuel.

Demand for natural gas tends to rise in the summer months as warmer temperatures increase the need for gas-fired electricity to power air conditioning. Approximately 49% of U.S. households use natural gas for heating, according to the Energy Department.

Meanwhile, the U.S. Energy Information Administration's next storage report slated for release on May 21 is expected to show a build of approximately 100 billion cubic feet for the week ending May 15.

Supplies rose by 106 billion cubic feet in the same week last year, while the five-year average change is an increase of 89 billion cubic feet.

The EIA said last week that natural gas storage in the U.S. rose by 111 billion cubic feet, compared to expectations for an increase of 116 billion and following a build of 76 billion cubic feet in the preceding week.

The five-year average gain for the period was an increase of 82 billion cubic feet, while supplies rose by 101 billion cubic feet during the comparable period a year earlier.

Total U.S. natural gas storage stood at 1.897 trillion cubic feet as of last week, 65.7% above year-ago levels and 2.0% below the five-year average for this time of year.

Last spring, supplies were 55% below the five-year average, indicating producers have made up for most of last winter’s unusually strong demand.

Elsewhere on the Nymex, crude oil for delivery in July lost $1.13, or 1.88%, to trade at $59.11 a barrel, while heating oil for June delivery slumped 1.2% to trade at $1.963 per gallon.