US natural gas futures climb on cooler forecasts

US natural gas futures on Wednesday climbed to the highest level in over a week on forecasts for less mild weather and higher heating demand over the next two weeks. Even though the weather will cool over the next two weeks, traders noted price gains would likely be limited because the forecasts continue to call for temperatures to remain warmer-than-normal into December.
Front-month gas futures for December delivery on the New York Mercantile Exchange rose 5.5 cents, or 2 percent, to settle at $2.764 per million British thermal units. Analysts estimate that utilities added 31 billion cubic feet of gas into storage during the week ended November 11. That compared with builds of 54 bcf in the prior week, 26 bcf a year earlier and a five-year average injection of 3 bcf.
The US Energy Information Administration will release its weekly gas storage report at 10:30 am EST on Thursday. After rising to a record high 4.017 trillion cubic feet during the week ended on November 4, analysts projected inventories could approach 4.1 trillion cubic feet later this month. Stockpiles will probably remain near record highs through 2016, analysts said. The latest long-term forecasts call for the weather to stay warmer than normal through December before turning colder than normal in January.
With storage at record levels and forecasts for warmer-than-normal temperatures in November, December, February and March, analysts said many traders had given up on earlier bullish bets for cold this winter. Thomson Reuters projected US gas usage would rise to an average of 77.4 billion cubic feet per day this week and 86.0 bcfd next week from 73.0 bcfd last week due to seasonal increases in heating demand that are necessary even during mild weather in November.
Gas supplies, meanwhile, should remain about the same as last week at around 78.1 bcfd during the next two weeks, Thomson Reuters data showed. US production averaged 70.4 bcfd over the past 30 days, its lowest since 2013. But it has risen over the past week to an average 70.9 bcfd as drillers slowly increased output in the Marcellus and Utica shale basins in Pennsylvania and Ohio since prices there have increased.