US natural gas futures rise in November on cold forecasts

US natural gas futures on Monday settled at their highest level in November on forecasts for colder, near-normal temperatures that are expected to last through the first week of December.
After rising almost 9 percent last week, front-month gas futures for December delivery on the New York Mercantile Exchange rose 10.7 cents, or 3.8 percent, to settle at $2.950 per million British thermal units.
Those increases made coal futures less expensive than gas for the first time since November 1. That in turn should make coal the cheaper fuel for some power generators.
The spike in the front-month due to the cold weather cut the premium of January futures over December to its smallest level since mid-October.
As the December contract enters its last week as the front-month, the market has shifted its focus to futures for January and the rest of the winter. The contracts with the most open interest were January at 294,000, March at 175,000 and April at 97,000. There were just 58,000 December contracts open.
With the expected rise in heating demand, Thomson Reuters projected US gas usage would climb to an average of 88.8 billion cubic feet per day this week and 90.3 bcfd next week from 77.4 bcfd last week.
Gas supplies, made up of US production and Canadian imports, for the next two weeks should remain about the same as last week at around 78.1 bcfd, the data showed.
Analysts estimated utilities added 2 billion cubic feet of gas into storage during the week ended November 18, probably the last injection of the year. That would boost stockpiles to a record high of about 4.05 trillion cubic feet.
But if forecasts for near-normal cold in December, January and February turn out to be correct, analysts said stockpiles would not remain at record levels for long as utilities pull gas out of storage to meet heating demand, especially with US production still at its lowest since 2013.
US production averaged 70.6 bcfd over the past 30 days, compared with 72.9 bcfd a year earlier and 71.9 bcfd two years earlier.
Output, however, has increased in recent weeks, rising to an average of 71.1 bcfd over the past seven days. Drillers have been pulling more gas out of the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia since prices there have increased.