US natural gas futures climb on colder weather

US natural gas futures climbed higher on Thursday after midday forecasts called for colder weather and rising heating demand through the end of December. Earlier in the day, both the US and European weather models pointed to less cold, but still below normal weather over the next two weeks.
After rising to a near two-year high in intraday trade on Wednesday, front-month gas futures on Thursday rose 9.2 cents, or 2.6 percent, to settle at $3.695 per million British thermal units. The contract hit a high of $3.748 on Wednesday, its highest since December 18, 2014. Over the past 14 days, the contract has soared about 37 percent. That kept the front-month in technically overbought territory for the 10th day in a row, its longest streak since June.
With freezing weather coming to the US Northeast over the next few days, next-day gas at the Algonquin hub in New England jumped to $9.35 per mmBtu, its highest since March 2015, while gas in New York rose to $4.20, its highest since February. Traders noted the futures market shrugged off the US weekly storage report because last week's draw was in line with analyst expectations.
The US Energy Information Administration said utilities pulled just 42 billion cubic feet (bcf) of gas out of storage during the warmer-than-normal week ended December 2. That compared with analysts' estimates for a draw of 43 bcf in a Reuters poll and declines of 50 bcf in the prior week, 69 bcf in the same week a year ago and a five-year average decrease of 61 bcf.
The latest long-term forecasts projected the weather would remain near normal in December before turning colder than normal in January. Thomson Reuters forecast US gas demand would rise from an average of 84.5 billion cubic feet per day (bcfd) last week to 96.7 bcfd this week and 108.5 bcfd next week, the most since February, as heating demand increases.
Analysts forecast the amount of gas in storage, which has remained at record highs since April, would fall below year-ago and five-year average levels by the end of the year, especially with US production stuck at its lowest since 2013 for this time of year.
US production averaged 71.1 bcfd over the past 30 days, compared with 73.3 bcfd during the same period in 2015, 72.1 bcfd in 2014 and 67.2 bcfd in 2013. Output over the past week, however, has declined to just 70.7 bcfd due in part to maintenance work even though prices in the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia this week hit their highest levels since November 2014.