Natural gas futures extend gains on inventories data, cold weather outlook

Natural gas rose for a fourth straight day after the Energy Information Administration reported on Thursday that U.S. natural gas inventories rose below the average in the week ended November 1, indicating robust demand. The power-station fuel was also supported as weather forecasting models continued to predict colder-than-normal weather in key U.S. consuming areas, boosting demand prospects.

On the New York Mercantile Exchange, natural gas for delivery in December rose by 1.15% to $3.560 per million British thermal units by 10:38 GMT. Prices surged to a session high of $3.562 per mBtu, near Thursdays one-week high of $3.619, while session low stood at $3.511. The energy source rose by 0.8% on Thursday, a third consecutive daily increase, and rose back to positive weekly territory on Friday, up 1.1%.

Futures extended gains after the Energy Information Administration reported on Thursday that U.S. natural gas inventories added 35 billion cubic feet in the week ended November 1, compared to the five-year average gain of 36 billion cubic feet and last years 27 billion increase during the comparable period. Total gas held in underground U.S. storage hubs rose to 3.814 trillion cubic feet, 2.9% lower than last years amount of 3.926 trillion. The surplus over the five-year average stockpiles narrowed by 0.1% to 1.5% from a week earlier, the report showed.

Inventories in the East Region rose by 10 billion cubic feet to 1.974 trillion and were 4.7% below the five-year average. In the West Region, stockpiles received a net injection of 3 billion cubic feet and were 8.6% above the average. Supplies in the Producing Region surged by 22 billion cubic feet to 1.285 trillion and exceeded the five-year average amount by 9.5%.

The power-station fuel continued to draw support as weather forecasts continued to call for lower-than-average temperatures in key U.S. consuming areas. According to MDA Weather Services in Gaithersburg, Maryland, readings in the eastern half of the U.S. may be below normal through November 16, confounding previous projections for milder conditions. The central parts of the U.S. are also expected to see colder-than-usual weather. According to AccuWeather Inc., temperatures in New York on November 14 may bottom at 32 degrees Fahrenheit, 10 below average.

When cool weather is expected, natural gas surges as increased electricity demand to power air-conditioning calls for more supply of the fuel, which is used for a quarter of U.S. electricity generation. Consumption usually picks up from November through March. According to the Energy Information Administration, power generation accounts for 32% of U.S. gas demand and 49% of U.S. households use the energy source for heating.