US natural gas futures ended up sharply on Friday, with the front-month contract driven to a 20-month high by bullish weekly storage data and stronger price expectations this year after a chilly winter helped whittle down record high inventories. Traders agreed Thursday's 94 billion cubic feet weekly inventory draw was bullish, noting that it came in above the Reuters poll estimate of 91 bcf and that stocks usually build slightly that week.
Inventory draws have exceeded market expectations in six of the last seven weeks. It was the first time since September 2011 that stocks dropped below the five-year average, a supportive sign particularly with another draw expected next week. Cold late-winter weather and above-average nuclear plant outages have helped put a huge dent in inventories and drive futures prices up about 30 percent since mid-February.
"I was expecting a pullback once the forecasts turned warmer, but it might be over already. Storage is well below last year, but we'll have to see how prices react next week once warmer weather arrives," said Steve Mosley at The SMC Report. Traders said upward revisions by some prominent price forecasters also backed some of the buying. Goldman Sachs on Thursday raised its 2013 US natural gas price forecast by 17 percent to $4.40 per mmBtu due to cold weather in March that helped tighten the market.
Front-month gas futures on the New York Mercantile Exchange ended up 17.8 cents, or 4.5 percent, at $4.125 per million British thermal units after climbing late to $4.135, its highest since August 2011. It was the biggest one-day gain for the nearby contract in four months. Despite modest losses early in the week, the front contract ended the week up 2.5 percent, the seventh straight weekly rise.
Volume was heavy, with the official tally to be posted on Monday likely to top the high so far this year of 758,506 hit on March 14. But many traders still expect milder spring weather to soon slow gas use and pressure prices, noting production was still high and there were plenty of new longs in the market that may rush to cash out quickly when more moderate weather moves in.
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