Natural gas futures touch one-week high on chilly US weather outlook

Natural gas futures advanced to one-week high on Monday, as weather forecasting models called for below-normal temperatures across many densely populated US areas, stoking demand for the power-station fuel, at a time when US gas stockpiles are already at a 10-year seasonal low.

On the New York Mercantile Exchange (NYMEX), natural gas for delivery in April rose by 1.58% to trade at $4.690 per million British thermal units by 11:04 GMT. Natural gas futures hit a session high at $4.732 per mBtu, the strongest since March 3, while day’s low was touched at $4.562 per mBtu.

Natural gas added 0.15% last week, after losing 26% in the previous 5-day period, the biggest weekly drop since December 1996. In 2013, the energy source added 26%, the best performance since 2005 and second straight annual advance.

Short-term weather outlook

NatGasWeather.com reported on March 10th that a high pressure formation will briefly build into the central and eastern US through Tuesday, temporarily easing natural gas and heating demand as temperatures warm into 40s and 50s over the northern US, while a large portion of the southern US may even see 70s.

However, a strong Canadian blast will track through the northern US and over all of the eastern US on Wednesday. The cold front is expected to push fairly deep into the Southeast, also bringing chilly temperatures across a large portion of the US. The very cold air will reach as far as Southern US and will be confined to the Great Lakes region and Northeast.

A strong winter storm will probably develop on Wednesday into Thursday and will bring moderate to heavy snowfall across the Ohio Valley and into the Northeast. According to the website, above normal natural gas demand is expected during the observed period.

Extended forecast

The weather pattern that will develop late next week will be quite cold, especially over the Great Lakes and Northeast and will last for the first 5 days of the outlook period as reinforcing shots of cold air continue. However, at the end of the period warmer conditions are expected over the northern US.

A fresh cold blast is expected to push deep into the Southeast early next week. Few days later, a reinforcing cold outbreak will follow, keeping temperatures over the northern US much-below-normal. A strong cold blast will sweep through the central and eastern US between March 18-21st, bringing freezing temperatures across many regions. The weather pattern will be a cold one, especially for the northern US and there are no signs of it ending at least until the beginning of April.

US gas inventories levels

The Energy Information Administration reported on Thursday that US natural gas inventories fell by 152 billion cubic feet in the seven days through February 28th, above the median analyst’ forecast of 138 billion cubic feet drop and compared to a withdrawal of 149 billion cubic feet a year ago. The decline was also well above the five-year average drop of 105 billion.

Total gas held in US underground storage hubs fell to a 10-year seasonal low of 1.296 trillion cubic feet. US gas stockpiles were 43.2% below last year’s amount of 2.104 trillion cubic feet during the comparable week. The deficit to the five-year average widened to a record 38.8%, up from 34.5% a week earlier.

Inventories at the East Region received a net withdrawal of 82 bcf and fell to 525 bcf, 41.3% below the five-year average of 895 billion cubic feet. Stockpiles in the West Region fell by 27 bcf to 190 bcf and were 37.5% beneath the average. Inventories at the Producing Region slid by 43 bcf. At 481 bcf, they were 36.2% below the five-year average amount of 754 billion cubic feet.