Natural gas futures extend gains after supply data

Forexpros – Natural gas futures advanced on Thursday, halting a sharp three-day decline after a report from the U.S. Energy Information Administration showed that natural gas inventories declined more-than-expected last week, however gains were limited as mild weather across the U.S. continues to limit demand for gas-fired heating.

On the New York Mercantile Exchange, natural gas futures for delivery in March traded at USD2.442 per million British thermal units during U.S. morning trade, rallying 2.5%.       

It earlier rose by as much as 2.95% to trade at a session high of USD2.453 per million British thermal units.

The March contract traded at USD2.390 prior to the release of the U.S. Energy Information Administration report.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended January 27 fell by 132 billion cubic feet, after declining by 192 billion cubic feet in the preceding week.

Analysts had expected U.S. natural gas storage to drop by 126 billion cubic feet.

Inventories fell by 171 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 202 billion cubic feet, according to U.S. Energy Department data.

Total U.S. natural gas storage stood at 2.966 trillion cubic feet as of last week. Stocks were 586 billion cubic feet higher than last year at this time and 601 billion cubic feet above the five-year average of 2.365 trillion cubic feet for this time of year.

The report showed that in the East Region, stocks were 218 billion cubic feet above the five-year average, following a withdrawal of 100 billion cubic feet.

Stocks in the Producing Region were 310 billion cubic feet above the five-year average of 789 billion cubic feet, after a net withdrawal of 22 billion cubic feet.

Natural gas prices have lost nearly 17.5% in the three sessions leading up to Thursday. On Tuesday, prices posted the biggest January loss in three years, dropping 7.8% as forecasts for milder weather and increased production signaled no end to a glut of the heating fuel.

Above-normal temperatures are expected across much of the U.S. in February, the U.S. National Oceanic and Atmospheric Administration said on Wednesday.

NOAA said the area of above-normal temperatures will stretch further into the northern and western Plains than had been projected earlier.

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.

Wall Street investment bank Morgan Stanley cut its 2012 forecast for natural gas prices by nearly 30%, citing weaker-than-expected heating demand. The bank slashed its estimate to an average of USD2.70 per million British thermal units, down from a previous forecast of USD3.85.

Last week, gas prices fell as low as USD2.319 per million British thermal units, the lowest since February 2002, before rebounding after production-cut announcements by major U.S. natural gas producers sparked a massive short-covering rally.

However, optimism faded amid the lack of production cut announcements from other major U.S. natural gas producers.

Exxon Mobil, the largest U.S. natural gas producer, said Tuesday it had no intention of curbing gas production.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in March fell 0.75% to trade at USD96.89 a barrel, while heating oil for March delivery added 0.36% to trade at USD3.056 per gallon.