US natural gas futures on Thursday jumped 5 percent to its highest level since early January on a bigger-than-expected weekly storage draw and cold forecasts. That continues this week's roller-coaster ride for the front-month. The contract fell over 5 percent on Monday on warmer forecasts and rose 5 percent on Tuesday on colder forecasts before easing near 2 percent on Wednesday.
The US Energy Information Administration forecast utilities pulled 151 billion cubic feet of gas from storage during the week ended Jan. 6, topping analysts estimates for a draw of 144 bcf in a Reuters poll. That compares with declines of 49 bcf in the prior week, 152 bcf a year earlier and a five-year average draw of 168 bcf for the week. Traders noted the front-month also climbed on forecasts for temperatures to drop to near-normal, cooler levels by the end of January. Forecasters at Commodity Weather Group on Thursday predicted the weather would turn colder over the next 11 to 15 days.
Front-month gas futures rose 16.2 cents, or 5 percent, to settle at $3.386 per million British thermal units, its highest level since Jan. 3. Over the past couple of weeks, however, the contract has mostly trended lower over on warmer forecasts, plunging 22 percent by Jan. 9 from its two-year high of $3.994 per mmBtu on Dec. 28. It has since recovered near 10 percent.
Meteorologists projected temperatures would remain warmer than normal for the rest of January, February and March, making this winter (November-March) warmer than both the 10- and 30-year averages, but cooler than last year's record warm levels. After a cold start to this week, Thomson Reuters estimated US gas demand would rise to an average of 112.0 billion cubic feet per day (bcfd) from 101.3 bcfd last week, before falling to 91.3 bcfd next week on more moderate temperatures.
The power sector has consumed less gas over the past couple of months because the cost of fuel at the Henry Hub benchmark in Louisiana has averaged about 60 percent higher since mid-November than the year-ago period, making coal a cheaper fuel for many generators.