Natural gas futures - weekly outlook: December 23 - 27

Investing.com - U.S. natural gas futures edged lower on Friday, as investors cashed out of the market to lock in gains from a recent rally which took prices to the highest level in more than two years.

On the New York Mercantile Exchange, natural gas futures for delivery in February declined 0.49% on Friday to settle the week at USD4.467 per million British thermal units. Nymex gas prices rallied to a session high of USD4.522 per million British thermal units earlier, the strongest level since July 21, 2011.

Natural gas futures were likely to find support at USD4.290 per million British thermal units, the low from December 19 and resistance at USD4.594, the high from July 21, 2011.

The February contract soared 5.03% on Thursday to settle at USD4.489 per million British thermal units after government data showed that U.S. natural gas supplies fell by a record amount last week.

But prices came under pressure on Friday as a break in the cold to milder weather prompted a correction in the market after the rapid price run up.

On the week, Nymex natural gas prices advanced 2.59%, the seventh consecutive weekly gain.

Thursday’s natural gas storage report from the Energy Information Administration said that natural gas supplies dropped by 285 billion cubic feet last week. Inventories fell by 70 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 133 billion cubic feet.

Total U.S. natural gas storage stood at 3.248 trillion cubic feet as last week, more than 13% below last year's unusually high level and nearly 7% below the five-year average for this time of year.

Early withdrawal estimates for next week’s storage data range from 135 billion cubic feet to 177 billion cubic feet, compared to a drop of 74 billion cubic feet during the same week a year earlier.

The five-year average change for the week is a decline of 125 billion cubic feet.

Elsewhere in the energy complex, light sweet crude oil futures for February delivery settled at USD99.32 a barrel by close of trade on Friday, up 2.73% on the week.

Meanwhile, heating oil for January delivery climbed 3.25% on the week to settle at USD3.075 per gallon by close of trade Friday.

Trading volumes are expected to remain light in the week ahead due to the Christmas holiday and as many traders already closed books before the end of the year, reducing liquidity in the market and increasing the volatility.