Natural gas futures - weekly outlook: December 30 - January 3

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Investing.com - U.S. natural gas futures fell sharply on Friday, as investors cashed out of the market to lock in gains from a recent rally after data showed that U.S. natural gas supplies fell broadly in line with market expectations last week.

On the New York Mercantile Exchange, natural gas futures for delivery in February plunged 2.41% on Friday to settle the week at USD4.368 per million British thermal units. Nymex gas prices fell to a session low of USD4.332 per million British thermal units earlier, the weakest level since December 19.

Natural gas futures were likely to find support at USD4.280 per million British thermal units, the low from December 19 and resistance at USD4.578, the high from December 23.

The February contract inched up 0.16% on Thursday to settle at USD4.476 per million British thermal units. On the week, Nymex natural gas prices declined 2.21%, the first weekly loss in eight weeks.

The U.S. Energy Information Administration said in its weekly report released Friday that natural gas supplies dropped by 177 billion cubic feet in the week ended December 20, in line with estimates.

Inventories fell by 74 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 125 billion cubic feet.

Total U.S. natural gas storage stood at 3.071 trillion cubic feet as last week, approximately 16% below last year's unusually high level and nearly 9% below the five-year average for this time of year.

Early withdrawal estimates for this week's storage data range from 110 billion cubic feet to 150 billion cubic feet, compared to a drop of 126 billion cubic feet during the same week a year earlier.

The five-year average change for the week is a decline of 121 billion cubic feet.

Meanwhile, market players continued to focus on winter weather forecasts to gauge the strength of heating demand for the fuel. Updated weather forecasting models called for chilly temperatures across the East Coast of the U.S. during the next six-to-ten days.

Colder-than-average winter temperatures increase the need for gas-fired electricity to heat homes, boosting demand for natural gas. The heating season from November through March is the peak demand period for U.S. gas consumption.

Natural gas prices have been well-supported in recent months, as chilly early winter weather helped drive prices to a two-and-a-half year high of USD4.578 on December 23. Natural gas prices are on track to end the year with a gain of nearly 23%.

Elsewhere in the energy complex, light sweet crude oil futures for February delivery settled at USD100.32 a barrel by close of trade on Friday, up 0.99% on the week.

Meanwhile, heating oil for January delivery climbed 1.63% on the week to settle at USD3.075 per gallon by close of trade Friday.

Trading volumes are expected to remain light in the week ahead, with many markets closed for the New Year's holiday, reducing liquidity in the market and increasing the volatility.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Forex and Currencies

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