US natural gas futures edged higher on Wednesday on forecasts for slightly cooler weather over the next two weeks that is expected to boost heating demand a bit. After climbing up in eight of the past nine trading days in a technical, short-covering rally, front-month gas futures on the New York Mercantile Exchange closed up 1.7 cents, or 0.9 percent, at $1.868 per million British thermal units. Traders said the technical rally started on March 4, when prices fell to an intra-day low of $1.611, the lowest level since August 1998.
"Whether or not the technicals and the growing perception view will be enough to sustain the current price rally is still a major question," Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note. "The reality remains that there is more gas around than at any time in history for this time of the year as the market enters the low-demand (spring) season."
In addition to recent gains in the front-month, the premium of March 2017 futures over April 2017 soared 25 percent over the past week. The March-April spread is known in the industry as the widow maker because of its history of wiping out speculators as it quickly changes direction.
Many analysts said utilities started injecting gas into storage last week. That would leave stockpiles at the end of March at an all-time high of around 2.5 trillion cubic feet, topping the end-of-withdrawal-season high of 2.369 tcf set in 2012. With so much gas in inventory going into the April-October summer injection season, analysts said, prices would have to remain low for the rest of 2016 to prevent supplies from hitting storage limits at the end of October. Gas prices at the Henry Hub benchmark in Louisiana averaged $2.61 in 2015, the lowest since 1999. So far this year.