Natural gas futures higher on cold weather forecasts

Forexpros – Natural gas prices traded higher Friday, on forecasts for cooler weather across much of the U.S. and bottom fishing investors.
 
On the New York Mercantile Exchange, natural gas futures for March delivery traded at USD2.49 per million British thermal units during early U.S. trade, gaining 0.36% 

Prices hit a high of USD2.52 per BTU earlier and a low of USD2.45 per BTU was posted during the trading session.
 
Natural gas prices were supported after the Commodity Weather Group stated it forecasts colder than normal temperatures into early next week on the east coast of the USA, earlier in the week.
 
However, prices fluctuated as traders said those expected brief periods of cold weather came far too late to dent the oversupply in the natural gas market.

Official supply data released last week showed that U.S. gas inventories remain at their highest level ever for this time of year. 

Total U.S. natural gas storage stood at 2.966 trillion cubic feet as of last week, 25% above both year-ago levels and the five-year average for this time of year. In the prior week, the surplus was 21% above historical levels. 

Early estimates for next week’s storage data range from a withdrawal of 78 billion cubic feet to 110 billion cubic feet, well below last year's drop of 206 billion cubic feet and the five-year average decline for the week of 191 billion.

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 industry weather group MDA EarthSat.    

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, 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 earlier in the week that it had no intention of curbing gas production. 
 
Official data last week indicated that U.S. gas supplies fell by 192 billion cubic feet. The drawdown was above the 184 billion cubic feet withdrawn in the same week a year earlier. It also topped the five year average withdraw of 173 billion cubic feet for the week.
 
Despite this significant drop, inventories remain at their highest level ever for this time of year. Total U.S. natural gas storage stood at 3.098 trillion cubic feet as of last week.
 
Earlier, Morgan Stanley cut its 2012 natural gas price forecast by almost 30% to an average USD2.70 per BTU.
 
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in March plunged 2.14% to trade at USD97.70 a barrel.