US natural gas futures edged 1 percent higher on Friday but registered a 4 percent drop on the week on the approach of spring after a severely cold winter that drove prices up. The front-month contract traded as low as $4.34 on Friday, down 10 cents from last week, below the 100-day moving average, and at the lowest level since late January, traders said.
However, the April futures contract on the New York Mercantile Exchange settled up 4.2 cents, or nearly 1 percent, at $4.425 per million British thermal units. For the week, the contract fell 4.2 percent, and it is poised to head lower, said Steve Mosley of The SMC Report. "We got a good extension down this week mainly because the weather forecast - while still showing a little below-normal for the eastern half of the country - is just a much more modest coolness compared to what we've seen up to this week," Mosley said.
"That gave us enough comfort that nobody wanted to buy (into the market)", Mosley said. This week's decline left gas futures up 4.6 percent for the year. MDA Weather Services forecast less severe cold in the Great Lakes to the East over the next six to 15 days. The latest US computer weather model showed slightly below-normal temperatures over the next 15 days, but milder than a forecast six hours earlier, according to Thomson Reuters Analytics.
Utilities pulled 195 billion cubic feet of gas from storage last week, the biggest draw in March, but in line with market expectations. The utilities have withdrawn a record 2.833 trillion cubic feet of gas from storage since the start of the heating season in November, leaving just 1.001 tcf in storage, the lowest storage level since 2003.
Gas consumers will need to inject an average of 13 bcf per day into storage over the summer to rebuild the inventory before the next heating season arrives, a gas industry spokesman said. The number of rigs drilling for gas in North America fell by one to 344 in the week to March 14, according to Baker Hughes data. The April contract premium over the May 2014 contract shrank to 2.2 cents from 2.8 cents a day earlier, according to Reuters data.
Gas contracts on the NYMEX for the balance of the year and the summer of 2014 both gained 8 cents to $4.46 and $4.44 per mmBtu, respectively, according to Reuters data. Gas futures for the full year 2015 on the NYMEX gained 11 cents to $4.23, and the 2016 contract gained 6 cents to $4.13, according to Reuters data. Traders watching technicals noted the 14-day moving average on the NYMEX fell below the 40-day moving average earlier this week.
Hub gas, the benchmark US supply point in Louisiana, for Monday was flat at $4.38 per mmBtu on the IntercontinentalExchange. The last next-day Henry Hub trade on ICE was at $4.40 per mmBtu, in line with the front-month NYMEX contract at that time. In New York, gas for Monday rose $2.83 to $8.05 per mmBtu. Chicago gas gained 4 cents to average $4.80 per mmBtu for Monday delivery.
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