Natural gas futures hit session high as US inventories fall more than expected

Natural gas spiked up to session high after the Energy Information Administration reported a larger-than-expected withdrawal in US stockpiles last week. Market players continued to eye short-term weather developments in the US, as well as extended forecasts for early-December.

On the New York Mercantile Exchange, natural gas for delivery in December traded 0.82% higher at $4.407 per million British thermal units at 15:46 GMT, having risen to a session high of $4.502 minutes after the reports release. The energy source surged 2.99% on Wednesday to $4.371, reversing the prior days 2.23% drop. Prices are up 9.6% so far this week.

The Energy Information Administration reported that US natural gas stockpiles fell by 17 billion cubic feet (bcf) in the seven days ended November 14th, the first withdrawal since the replenishment season began in April. Last weeks draw compared to analysts projections for a decline of 6-12 billion cubic feet and exceeded the five-year average drop of 10 bcf.

Total gas held in US storage hub fell to 3.594 trillion cubic feet, widening the deficit to the five-year average of 3.838 trillion to 6.4% from 6.2% during the previous period. Last weeks inventory level was also 5.3% below last years 3.795 trillion during the comparable period.

The East Region saw a net withdrawal of 11 bcf to 1.953 trillion and was 5.1% below the five-year average, while stockpiles in the West Region fell by 7 bcf to 495 bcf and stood 6.6% beneath the average. The Producing Region received a net injection of 1 billion cubic feet, posting a 8.4% deficit to the five-year average.

US weather

According to NatGasWeather.com, natural gas demand in the US will be high compared to normal over the next seven days, but becoming moderate, with a neutral weather trend for the November 27 – December 3 span.

Freezing temperatures will drive very strong heating demand across the eastern and central US for one last day today as an Arctic blast sweeps across the Great Lakes and Northeast. However, milder temperatures have already started to make their way northward from Texas and the Plains and will extend into the Midwest and eastern US this weekend. Readings over the affected regions are expected to become seasonal or slightly higher.

A new cold weather system with rains and snow will hit the north-central US next week, NatGasWeather.com reported, although it will have a lesser effect compared to the current Arctic outbreak. Late next week, around Thanksgiving Day, a number of chilly weather systems will track across the central and eastern US, pushing temperatures below normal into the weekend. Warmer conditions are expected to follow, giving December a mild start for most of the US.

However, a pool of Arctic air right across the Canadian border stands a decent chance of being tapped by some of the weather systems tracking over the northern US late next week. If this happens, the weather trend across the North, and then possibly the eastern and central US as well, could turn much colder very swiftly.