Natural gas futures fluctuate on cold weather outlook, inventories data

Natural gas futures swung between gains and losses as investors weighed forecasts for colder-than-usual weather in key U.S. consuming areas against expectations inventories rose more than expected last week.

On the New York Mercantile Exchange, natural gas for delivery in December fell by 0.07% to $3.557 per million British thermal units by 14:57 GMT. Prices held in range between days high and low of $3.597 and $3.543 per mBtu respectively. The power-plant fuel rose by 0.8% on Friday, a fourth consecutive daily advance, and settled the week 1% higher after it lost 6.6% in the preceding two five-day periods.

Natural gas continued to draw support and traded mostly higher throughout the day on outlook for colder-than-usual weather in parts of the U.S. Commodity Weather Group LLC in Bethesda, Maryland, predicted below-average temperatures across the eastern half of the U.S. through November 15. According to AccuWeeather Inc., readings in New York may bottom at 34 degrees Fahrenheit on November 13, 9 below average.

When cold weather is expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of U.S. electricity generation. Consumption usually picks up from November through March. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand and 49% of U.S. households use the energy source for heating.

Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said for Bloomberg: “We’re supposed to get some winter-like temperatures this week and the forecasts are giving the market a little bit of support. The market is respecting the fact that we have the whole winter ahead of us.”

The energy source was however pressured as market players eyed the upcoming weekly U.S. natural gas inventories report by the EIA, due at 14:30 GMT on Thursday. Early injection estimates for this weeks data range between 16 billion and 36 billion cubic feet, compared to the five-year average increase of 19 billion cubic feet and last years 12 billion gain during the comparable week.

Natural gas extended gains last week after the Energy Information Administration reported on Thursday that U.S. natural gas inventories added 35 billion cubic feet in the week ended November 1, compared to the five-year average gain of 36 billion cubic feet and last year’s 27 billion increase during the comparable period. Total gas held in underground U.S. storage hubs rose to 3.814 trillion cubic feet, 2.9% lower than last year’s amount of 3.926 trillion. The surplus over the five-year average stockpiles narrowed by 0.1% to 1.5% from a week earlier, the report showed.

Inventories in the East Region rose by 10 billion cubic feet to 1.974 trillion and were 4.7% below the five-year average. In the West Region, stockpiles received a net injection of 3 billion cubic feet and were 8.6% above the average. Supplies in the Producing Region surged by 22 billion cubic feet to 1.285 trillion and exceeded the five-year average amount by 9.5%.