US natural gas futures ended higher on Friday for the fourth straight session, backed by chilly weather forecasts for the next 10 days that should underpin heating demand despite early selling on profit taking ahead of the weekend. Gas inventories started the heating season at record highs, but cold late-winter weather, a chilly spring and above-average nuclear plant outages have put a huge dent in inventories and prompted higher price estimates for this year.
"People are looking at storage (in deficit), and the weather forecasts look fairly supportive. The supply-demand balance is not loose enough yet, so there's still opportunity for more upside," said Steve Mosley at The SMC Report in Arkansas. Front-month gas futures on the New York Mercantile Exchange ended up 0.7 cent at $4.408 per million British thermal units after stalling at $4.42, just shy of Thursday's 21-month high of $4.429. The front contract, which gained 6.6 percent in the last four sessions, ended the week up 4.4 percent, the ninth straight weekly rise.
Front-month prices have mostly been in an uptrend since mid-February, gaining some 40 percent in the last nine weeks. But with weather bound to turn milder soon and slow overall demand, concerns are growing that the market may be ripe for a pullback. The record growth in futures open interest that has accompanied recent price gains means there are a lot of new longs in the market who may rush to take profits as moderating spring temperatures finally slow space heating needs. Traders also note that gas prices are at levels that could dampen demand by prompting more utilities to switch back to coal for power generation. High prices may also tempt producers to turn on more wells, increasing supply. Forecaster MDA Weather Services said cool weather should continue in the Plains, Midwest and South for the next 10 days. It said the East Coast was expected to shift to warmer weather later this month and in early May.
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