US natural gas futures ended up a bit on Friday, maintaining gains from earlier this week to the highest level since January, as some traders covered short positions. Front-month gas futures on the New York Mercantile Exchange closed up 0.8 cents at $3.016 per million British thermal units, keeping the contract in overbought territory for a second day in a row.
With gains this week, the front-month ended up for a third week in a row, the longest weekly winning streak in 11 months. In addition, the premium of the gas contract over coal futures remained above $1 per mmBtu for a second day in a row. Traders noted that a gas premium of $1.50 over coal makes it cheaper to burn coal instead of gas at many power plants. The premium of gas for calendar year 2017 over 2016 and the premium of calendar 2020 over the 12-month strip both fell to the lowest levels since December.
The premium of the March 2016 futures over April 2016, the so-called widow maker, climbed to the most since December. In other technical news, the 25-day moving average for the gas front-month was close to crossing over the 50-day for the first time since December. Some of the most active options were the $2 September 2015 and the $1.75 July 2015 puts.
Thomson Reuters Analytics said the Global Forecast System weather model for the lower 48 US states called for warmer-than-normal weather over the next two weeks, with 103 population-weighted cooling degree days.
That compared with Thursday's forecast of 96 CDDs and a norm of 83 CDDs for this time of year. The warmer weather was expected to boost consumption in the lower 48 states to 53.6 billion cubic feet per day over the next two weeks, from Thursday's forecast of 53.4 bcfd and a 30-year norm of 49.9 bcfd, according to Thomson Reuters Analytics. Production in the lower 48, meanwhile, was expected to hold at 73.0 bcfd, the same as Thursday.
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