US natural gas futures ended down about 1 percent on Friday as traders took profits on gains over the previous four days, but still ended the week up about 4 percent. The four days of gains had boosted the front-month to its highest level in a month. That four-day run, over which futures rose about 5 percent, was also the market's longest winning streak since late January.
Front-month natural gas futures on the New York Mercantile Exchange closed down 3.5 cents, or 0.8 percent, at $4.62 per million British thermal units. The May NYMEX contract traded between $4.61 and $4.67 per mmBtu overnight. The front-month is now up 9 percent since the start of the year.
"Selling pressure may be short-lived, however, as a sharp cold front is set to descend on the eastern half of the country next week," Addison Armstrong, senior director of market research at Tradition Energy, said in a note. MDA Weather Services forecast warm weather along the US East Coast before a period of cool blankets the eastern two-thirds of the country over the next six to 10 days.
The latest US computer weather model forecasts slightly above normal temperatures over the next 15 days, which was a little warmer than a forecast six hours earlier, according to Thomson Reuters Analytics. The US Energy Information Administration said on Thursday that utilities injected 4 billion cubic feet of gas into storage last week, below analyst estimates in a Reuters poll of a 13 bcf injection and below the five-year average injection of 9 bcf. Last year, utilities pulled 25 bcf of gas from storage during a late blast of cold weather.
Gas in storage is now at 826 bcf, the lowest for this time of year since 2003. Analysts forecast utilities injected gas into storage for a second week in a row this week after pulling record amounts of the heating fuel during a frigid winter. In early estimates, analysts forecast utilities boosted gas stocks by 24 to 53 bcf this week with an average of 36 bcf. That is over the 25 bcf injection during the same week last year and is in line with the five-year average injection of 37 bcf.
FORWARD NYMEX PRICES The May 2014 contract traded about 1.5 cents per mmBtu under the June 2014 contract on the NYMEX, up from 1.6 cents under the June contract on Thursday, according to Reuters data. Gas contracts on the NYMEX for the balance of the year and winter 2014 both held at $4.68 and $4.78 per mmBtu, near the highest levels since late February, according to Reuters data.
Analysts said gas prices for the rest of the year will have to rise to encourage drillers to produce more gas for storage and avoid shortages and price spikes next winter. Producers however reduced the number of rigs drilling for gas - down six this week to just 310 - the lowest in 21 years, data from oil services firm Baker Hughes showed on Friday.
Gas futures on the NYMEX for the full-year 2015, meanwhile, lost three cents to $4.35, while 2016 held steady at $4.13 per mmBtu, according to Reuters data. The premium of the front-month gas contract on the NYMEX over the front-month Appalachian coal contract eased to $2.10 per mmBtu from $2.14 per mmBtu on Thursday, which was the highest premium since mid-March, according to Reuters data. Traders consider a gas premium of $2 over coal as wide enough to offset the cost of transporting coal from mines to generating plants and the lower efficiency of a coal plant compared with a gas plant.
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