US natural gas futures surged to a near two-month peak on Thursday as weather forecasts turned cooler, which could boost heating demand, and on short-covering as the contract nears its expiry. A day before the contract expires, front-month gas futures for January delivery on the New York Mercantile Exchange rose 12.2 cents, or 5.6%, to settle at $2.294 per million British thermal units (mmBtu). This is their largest daily percentage gain since October 29.
Data provider Refinitiv estimated 411 heating degree days (HDDs) in the Lower 48 US states over the next two weeks, higher than the 372 HDDs estimated on Tuesday- indicative of cooling weather. The weather, however, is still warmer than normal.
"Natural gas is higher this morning on weather forecast patterns for middle January," said Robert DiDona of Energy Ventures Analysis, adding that the cold trend is causing some short covering.
Thin trade during the holiday week is leading to more volatility, he said. With the weather expected to turn chillier, Refinitiv predicted demand in the Lower 48 states, including exports, would average 113.9 billion cubic feet per day (bcfd) next week, increasing from the 112.3 bcfd estimated for the current week.
Analysts said utilities likely pulled 148 billion cubic feet (bcf) of gas from storage during the week ended Dec. 20. That compares with a withdrawal of 61 bcf for the same week last year, and a five-year average draw of 101 bcf.
If correct, the decrease during the week ended Dec. 20 would reduce stockpiles to 3.263 trillion cubic feet (tcf), about 1.7% below the five-year average and 19.4% above the same week a year ago. Gas production in the Lower 48 states dipped to 95.1 bcfd on Wednesday from 95.2 bcfd on Tuesday, according to Refinitiv.
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