Natural gas futures - Weekly outlook: December 31 - January 4

Investing.com - Natural gas futures ended Friday’s session higher, as market players continued to focus on shifting weather forecasts for the next few weeks to gauge the strength of U.S. heating demand.  

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 jumped 1.55% Friday to settle at USD3.465 per million British thermal units by close of trade.

The February contract touched a high of USD3.486 per million British thermal units earlier in the session.

On the week, natural gas prices were little changed.

Natural gas prices found support after extended weather forecasts showed colder weather descending across most parts of the U.S. in the first two weeks of January.

The lower 48 states will experience cooler-than-normal temperatures in the next 10 days, according to various weather services, which should prompt more households and businesses to turn up the heating.

Bullish speculators are betting on the cold weather boosting winter demand for the heating fuel. The heating season from November through March is the peak demand period for U.S. gas consumption.

Earlier forecasts made this week predicted slightly warmer temperatures in store for the U.S., which pushed prices down in earlier sessions.

Meanwhile, the U.S. Energy Information Administration said Friday that natural gas supplies fell less-than-expected last week.

The U.S. EIA said in its weekly report that natural gas storage in the U.S. in the week ended December 21 fell by 72 billion cubic feet, compared to expectations for a decline of 76 billion cubic feet.

Inventories fell by 87 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 140 billion cubic feet.

Total U.S. natural gas storage stood at 3.652 trillion cubic feet as of last week, 2.5% higher than last year’s level and 13% above the five-year average for this time of year.

Early withdrawal estimates for next week’s storage data range from 100 billion cubic feet to 141 billion cubic feet.

Inventories fell by 77 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 111 billion cubic feet.

The EIA report was delayed by one day this week due to the Christmas holiday and will be delayed by one day again next week due to the New Year holiday.

The heating fuel has lost nearly 14% 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 in the energy complex, light sweet crude oil futures for February delivery settled at USD90.69 a barrel by close of trade on Friday, adding 2% on the week.

Meanwhile, heating oil for February delivery rose 0.45% over the week to settle at USD3.024 per gallon by close of trade Friday.