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Natural gas futures - weekly outlook: November 2 - 6

Published 02/11/2015, 12:58 am
Updated 02/11/2015, 01:01 am
© Reuters.  Chilly weather outlook boosts natural gas prices
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Investing.com - Natural gas futures jumped almost 3% on Friday, as forecasts for chilly temperatures across key consumption regions of the U.S. boosted demand expectations for the fuel and triggered a round of short-covering.

On the New York Mercantile Exchange, natural gas for delivery in December rose 6.4 cents, or 2.84%, to close the week at $2.321 per million British thermal units. It was the largest one-day gain in almost two months.

Updated weather forecasting models released Friday afternoon showed that a cold front will impact the northern U.S. in mid-November. Forecasts had previously called for warmer, well above-normal temperatures over the next two weeks.

Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on early-winter heating demand.

The heating season from November through March is the peak demand period for U.S. gas consumption.

For the week, the front-month December natural gas contract lost 14.3 cents, or 5.8%, as forecasts pointed to unseasonably warm readings for early November.

On Thursday, futures slumped 4.1 cents, or 1.78%, despite a smaller-than-expected storage build. According to the U.S. Energy Information Administration, natural gas supplies in storage rose by 63 billion cubic feet last week, below expectations for an increase of 69 billion.

That compared with builds of 81 billion cubic feet in the prior week, 87 billion cubic feet in the same week last year, while the five-year average change for the week is an increase of 81 billion cubic feet.

Total U.S. natural gas storage stood at 3.877 trillion cubic feet, 4.1% above the five-year average for this time of year and 12% above their level at this time a year ago.

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.

Stockpiles are set to reach a record by the end of this month. The EIA sees storage levels peaking at 3.956 trillion in November, which would top the November 2012 high of 3.929 trillion.

The North American natural-gas market has been mired in a supply glut for years amid robust output.

Industry research group Baker Hughes (N:BHI) said late Friday that the number of rigs drilling for natural gas in the U.S. increased by four last week to 197. Natural gas traders closely watch the rig count to gauge future supply growth.

The EIA's next storage report slated for release on Thursday, November 5 is expected to show a build of approximately 75 billion cubic feet for the week ending October 29.

That compares with builds of 91 billion cubic feet in the same week last year, while the five-year average change for the week is an increase of 68 billion cubic feet.

Elsewhere on the Nymex, crude oil for December delivery settled at $46.59 a barrel by close of trade on Friday, up $1.85, or 4.46%, on the week, while heating oil for December delivery rose 3.09% on the week to settle at $1.499 per gallon.

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