Natural gas futures - Weekly outlook: January 28 - February
Natural gas futures ended Friday’s session slightly higher, as traders continued to monitor weather forecasts in an attempt to gauge the impact of shifting forecasts on winter heating demand.
On the New York Mercantile Exchange, natural gas futures for delivery in February eased down 0.3% Friday to settle at USD3.445 per million British thermal units by close of trade.
On the week, natural gas prices tumbled 3.55%, the first weekly decline in three weeks.
The front-month February contract is due to expire at the end of Tuesday’s trading session. Contract expiration often leads to volatile sessions as market participants look to close out positions or reposition their portfolios.
Meanwhile, the more actively traded contract for March delivery climbed 1.3% on Friday to settle the week at USD3.465 per million British thermal units.
Updated weather forecast models released Friday shifted from warm to cold and back again in the eight- to 14-day forecast.
Near-term forecasts called for a break in the recent bout of frigid weather that has plagued the U.S. Midwest and Northeast in the past two weeks, before the eastern half of the nation sees below-normal temperatures again during the first week of February.
The Commodity Weather Group added Friday that it expected an "impressive" warm-up early next week, before cold air was expected to return to the Midwest and then spread east by midweek, dropping temperatures to below or much below normal into early February.
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.
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.
Still-high inventory-levels have also weighed on prices.
The U.S. Energy Information Administration said Thursday that natural gas storage in the U.S. in the week ended January 18 fell by 172 billion cubic feet, broadly in line with market expectations.
Inventories fell by 162 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 176 billion cubic feet.
Total U.S. natural gas storage stood at 2.996 trillion cubic feet as of last week, 5% below last year’s level, but 12% above the five-year average for this time of year.
Early withdrawal estimates for this Thursday’s storage data range from 196 billion cubic feet to 210 billion cubic feet.
Inventories fell by 149 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 178 billion cubic feet.
If withdrawals for the rest of winter season match the five-year average pace, inventories will end the heating season at 2.048 trillion cubic feet, nearly 18% above normal, but 17% below last year's end-winter record of 2.48 trillion cubic feet.
The heating fuel has rallied nearly 11% since falling to a four-month low of USD3.087 per million British thermal units on January 9, boosted by calls for colder temperatures in major consuming regions across the U.S.