Investing.com - Natural gas prices inched higher on Friday, as investors returned to the market to close out bets on lower prices after futures sank to the lowest level since March 1999, amid worries over weak heating demand in the face of a warmer winter.
On the New York Mercantile Exchange, natural gas for delivery in January tacked on 1.2 cents, or 0.68%, to close the week at $1.767 per million British thermal units on Friday.
It earlier fell to $1.684, a level not seen in almost 17 years, as updated weather forecasting models pointed to warmer-than-normal temperatures across most parts of the U.S. through Christmas.
The East Coast is projected to see temperatures 15 to 20 degrees above normal in the week ahead and warm weather is also expected in the Midwest.
Bearish speculators are betting on the warm pre-winter weather to dampen demand for the heating fuel. The heating season from November through March is the peak demand period for U.S. gas consumption.
Natural gas prices typically rise ahead of the winter as colder weather sparks heating demand, yet an unusually mild start to winter due to the El Niño weather phenomenon has limited the amount of heating days.
For the week, natural gas futures plunged 14.6 cents, or 11.21%. Prices of the fuel are down nearly 46% so far this year as weak demand and healthy stockpiles weighed.
On Thursday, natural gas futures lost 3.5 cents, or 1.96%, after data showed U.S. natural gas supplies in storage fell less than expected last week.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended December 11 declined by 34 billion cubic feet, below expectations for a withdrawal of 40 billion.
That compared with a drawdown of 76 billion cubic feet in the prior week, 61 billion cubic feet in the same week last year, while the five-year average change for the week is a decline of 120 billion cubic feet.
Total U.S. natural gas storage stood at 3.846 trillion cubic feet, 14.1% higher than levels at this time a year ago and 8.4% above the five-year average for this time of year.
Last spring, supplies were 55% below the five-year average, indicating producers have more than made up for all of last winter’s unusually strong demand.
Inventories of the gas are typically built up during the warm summer months and then drawn down in the winter as cold temperatures increase demand for the fuel.
The EIA's next storage report slated for release on Thursday, December 24 is expected to show a withdrawal of approximately 45 billion cubic feet for the week ending December 18.
That compared with a decline of 49 billion cubic feet in the same week last year, while the five-year average change for the week is a drawdown of 140 billion cubic feet.
Elsewhere on the Nymex, crude oil for January delivery settled at $34.73 a barrel by close of trade on Friday, down 89 cents, or 2.49%, on the week, while heating oil for January delivery slumped 3.36% on the week to settle at $1.107 per gallon.