US natural gas futures jumped over three percent and hit a two-week high on Friday ahead of the Christmas and New Year's holiday week amid colder forecasts for January. That move came despite warmer-than-normal forecasts through the end of the year. Front-month gas futures settled up 12.4 cents or 3.5 percent, at $3.662 per million British thermal units.
Earlier in the session, the contract climbed to $3.715, its highest since December 8. The front-month rose about 8 percent this week, putting it up for a fifth week in the last six. The front-month has had a volatile run for the past several weeks. It dropped 9 percent last week on warmer forecasts after soaring 43 percent over the prior four weeks on a colder outlook.
Longer term, the latest weather models forecast slightly colder-than-normal temperatures in January and February before turning warmer than normal in March. Thomson Reuters projected the cold start to this week helped boost US gas demand to 111.5 billion cubic feet per day on average from 108.3 bcfd last week, before falling to 91.8 bcfd during the Christmas and New Year's holiday week, when temperatures are expected to moderate.
In early forecasts, analysts said utilities likely pulled 207 billion cubic feet of gas from storage during the colder-than-normal week ending on Friday. If correct, that would be the biggest draw since at least 1994, according to federal energy data going back that far, and compares with declines of 209 bcf in the prior week, 50 bcf a year earlier and a five-year average of 801 bcf for that week.
Analysts forecast the amount of gas in storage would fall below weekly five-year averages by year-end for the first time since May 2015, especially with US production stuck at its lowest level for this time of year since 2013. US production averaged 70.7 bcfd for the past 30 days, compared with 73.4 bcfd a year earlier, 72.7 bcfd for the same period in 2014 and 66.6 bcfd in 2013, according to Reuters data. Output in the past week, however, was down to just 70.1 bcfd even though prices in the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia recently traded near their highest since November 2014.
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