US natural gas futures settled up 4 percent on Friday, hitting three-week highs as freezing weather across much of the country fuelled speculation about higher heating demand that overshadowed worries about high gas stockpiles. Front-month gas futures on the New York Mercantile Exchange closed up 11.7 cents at $2.951 per million British thermal units. The session high was $2.984, the highest since January 27.
The market could test the psychological $3 barrier next, traders said. "There is potential for a sustained rally," said Aaron Calder, senior market analyst at Gelber Associates in Houston. US utilities pulled 111 billion cubic feet of gas from storage last week, a draw some market bears said was inadequate to support prices given high gas stockpiles. Inventories totalled 2.157 trillion cubic feet as of last week, about 50 percent above year-ago levels, data showed.
While that was unsettling for some traders, others bet that demand for heating will spike in coming days due to forecasts for freezing weather, particularly on the US East Coast, which is a major market for natgas-powered heating. "Stronger cold remains a possibility in the Northeast," MDA Weather Services said in its six-to-10-day forecast, which also flagged colder conditions in the central region. Reuters data indicated greater need for heating over the next two weeks.
Thomson Reuters Analytics' latest Global Forecast System weather model for the lower 48 US states called for 539 heating degree days (HDDs) over the next two weeks. That was lower than the 542 reading earlier on Friday but higher than the 532 HDDs forecast on Thursday. It was also well above the 363 HDDs normal for this time of year.
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