Natural gas continued its upward trend on Friday, having hit fresh 6-months highs yesterday on cold weather outlook across most of the densely populated US areas, which boosts demand for the power-station fuel for heating purposes. EIA report further supported the market, showing robust demand, as US gas inventories fell in line with expectations last week.
On the New York Mercantile Exchange, natural gas futures for settlement in January traded at $3.934 per million British thermal units at 10:52GMT, up 0.99% on the day, after reaching a 6-month high at $3.942 per million British thermal units yesterday. Prices held in range between day’s low of 3.938 and session high at 3.921 per mBtu. The energy source was up 3.8% on weekly basis on Friday.
The Energy Information Administration reported on Wednesday, a day earlier due to the Thanksgiving holiday, a smaller-than-projected withdrawal in US inventories in the week ended November 22nd. Stockpiles fell by 13 billion cubic feet, which was a smaller decline than the maximum projected withdrawal of 20 billion cubic feet, but was still in line with median forecasts. Last week’s decrease was below the 5-year average decline of 15 billion cubic feet, but more than six times larger than the withdrawal of 2 billion cubic feet during the comparable period a year earlier.
Total gas held in U.S. underground storage hubs equaled 3.776 trillion cubic feet and were 2.6% below last year’s amount of 3.876 trillion. However, the surplus over the five-year average inventories widened to 0.5% from 0.4% a week earlier.
On Thursday, Tim Evans, an energy analyst at Citi Futures Perspective in New York, cited by Bloomberg, said: “While arguably near average and therefore neutral, we view the report as constructive, a larger draw than it might have been and no offset to the larger net withdrawals anticipated for the weeks ahead, as colder temperatures boost heating demand.”
According to NatGasWeather.com, the temperatures in the eastern US during the weekend are expected to be freezing and bring snow bands. The cold weather formation will make it deep into the Southeast on Friday, leaving freezing temperatures.
Early next week, a quieter period over the northern US is expected, before a bitter cold Arctic blast encompasses the southwestern regions of Canada around December 2nd. This blast will be formed into the Pacific Northwest and Great Basin, before it hits the plains and the south. Huge temperatures anomalies are expected, which will increase the demand for natural gas.
NatGasWeather.com’s extended forecast for the week ending December 11th called for a significant Arctic outbreak to sweep across much of the US. The storm will be formed around the Pacific Northwest and northern Rockies, after which it is likely to reach as far as the Plains and deep into the south. There is probability for this cold blast to lower temperatures across much of the northern and central US as much as 25-30 degrees below normal average.
According to AccuWeather.com, the low in Houston on December 8th will be 41 degrees Fahrenheit, beneath the average of 48 degrees, while readings in Boston will be 24 degrees Fahrenheit, 7 degrees below usual. The low in Chicago on December 6th will be 14 degrees Fahrenheit, 11 degrees below normal.
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. Above-average readings in the winter season have the opposite effect. 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.