Natural gas futures - Weekly outlook: February 13 - 17

Forexpros - Natural gas prices held steady on Friday, as reports of some production cuts and chilly weekend weather supported prices amid ongoing concerns over elevated U.S. inventory levels.

On the New York Mercantile Exchange, natural gas futures for delivery in March settled at USD2.476 per million British thermal units by close of trade on Friday, shedding 1.03% over the week.

Natural gas prices fluctuated between small gains and losses on Friday as traders weighed the prospect of additional production cuts while continuing to monitor weather forecasts in key gas-consuming regions in the U.S. to gauge demand for the heating fuel.

On Thursday, the second largest U.S. natural gas producer Chesapeake Energy said that it had cut more than 500 million cubic feet per day of output and reiterated its earlier decision that it could cut up to one billion cubic feet a day if prices stay low.

Natural gas traders have been keeping a close eye on any moves by gas producers to limit production in the face of low prices.

With high levels of production continuing across the U.S., only a prolonged period of frigid weather in the last six weeks of winter is likely to reduce stockpile levels and raise prices.

Weather forecasters are predicting colder-than-normal temperatures across much of the Northeastern, Midwest and Southern U.S. states in the next three-to-five-days, however milder temperatures are expected to sweep across most of the U.S. during the next two weeks.

Industry weather group MDA EarthSat said in its March outlook published Thursday, that unseasonable warmth was expected across the South and East regions, with mostly seasonal temperatures for the rest of the nation.    

This is typically the coldest time in winter, but temperatures in the U.S. have yet to reach levels cold enough to boost demand for the heating fuel, keeping prices depressed at unseasonably low levels.

Winter so far in the U.S. has been the second mildest since 1950. It is running about 13% warmer than the 30-year normal, according to recent data from MDA EarthSat.    

A report from the U.S. Energy Information Administration on Thursday showed that natural gas storage in the U.S. fell by a less-than-expected 78 billion cubic feet in the preceding week.

Inventories declined by 206 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 191 billion cubic feet, according to U.S. Energy Department data.

Total U.S. natural gas storage stood at 2.888 trillion cubic feet as of last week, 32% above the five-year average for this time of year.

Inventory withdrawals this winter are running nearly 480 billion cubic feet below average, or about 33%, due to the lack of heating demand this winter.

Gas prices fell to USD2.319 per million British thermal units on January 20, the lowest since February 2002, before rebounding after a production-cut announcement by Chesapeake Energy sparked a massive short-covering rally.

However, market participants are reluctant to bet that prices will rise further amid a lack of production cut announcements from other major U.S. natural gas producers.

Traders said planned cuts so far were not enough to tighten a market seen oversupplied by as much as 3 billion cubic feet per day, or more than 4%.

Most analysts now expect gas inventories to end the winter at approximately 2.1 trillion cubic feet, 35% above average and near the all-time high for end-season storage of 2.148 trillion cubic feet set in 1983.

Elsewhere on the NYMEX, light sweet crude oil futures for March delivery traded at USD99.36 a barrel by close of trade on Friday, gaining 1.68% on the week, while heating oil for March delivery rose 2.19% over the week to settle at USD3.187 per gallon by close of trade Friday.