Natural gas futures advance on cold weather outlook, inventories withdrawal expectations

Natural gas futures rebounded after falling on Monday as weather forecasting models called for below-average temperatures in most of the U.S. through the end of November and into December, stocking demand for the power-station fuel. Expectations for a decline in U.S. inventories in the week ended November 15 also gave prices a lift.

On the New York Mercantile Exchange, natural gas futures for settlement in December rose by 0.37% to $3.631 per million British thermal units by 14:20 GMT. Prices shifted in a days range between $3.647 and $3.613 per mBtu. The energy source fell by 0.8% on Monday but pared its weekly decline to little over 0.4% following Tuesdays rebound.

The power-plant fuel drew support on expectations for readings across the eastern U.S. to fall later this week and remain below-usual through the start of December. According to Commodity Weather Group LLC in Bethesda, Maryland, temperatures from Texas to the Great Lakes and east through New England, including Houston and Chicago will be below-average between November 23 and November 27. Readings on the East Coast might be up to 5 degrees lower.

According to AccuWeather Inc., temperatures in New York on November 27 may bottom at 28 degrees Fahrenheit, 10 below average, while the low in Chicago may be 19 degrees, 10 below the average. Readings in Houston are projected to fall to 39 degrees, 11 below usual, while Boston may see a low of 25 degrees Fahrenheit, 10 beneath the average.

The agency also predicted colder-than-usual weather in most of the eastern U.S. between November 28 and December 2, while readings in the South may drop to 5 degrees Fahrenheit below normal. NatGasWeather.com reported that snow could fall as far south as Texas after an expected blast of cold air pushes into much of the U.S. early December.

When cold 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.

Market players will also be keeping a close watch on this weeks inventories report by the Energy Information Administration, due on Thursday. According to early withdrawal estimates, the Energy Information Administration is expected to report that stockpiles fell by between 15 and 41 billion cubic feet in the week ended November 15, compared to the five-year average decline of 2 billion and last year’s 36 billion cubic feet decrease during the comparable period.

The energy source drew support last week after the EIA reported on Thursday that U.S. natural gas inventories rose less than projected in the seven days through November 8, although the gain was still above the average. Stockpiles added 20 billion cubic feet, above the five-year average build of 19 billion and last year’s 12 billion increase during the comparable week. Inventories were expected to surge by 22 billion cubic feet according to the median estimate of 18 analysts surveyed by Bloomberg.

Total gas held in underground U.S. storage hubs equaled 3.834 trillion cubic feet, 2% below last year’s 3.914 trillion during the comparable period. The surplus over the five-year average total amount of gas remained unchanged at 1.5%.