Natural gas futures - Weekly outlook: May 13 - 17

A A A - Natural gas futures ended Friday's session at a five-week low, as forecasts showing mild weather for the rest of May weighed on demand expectations for the fuel, while Thursday's release of a bearish U.S. supply report also added to the selling pressure.

On the New York Mercantile Exchange, natural gas futures for delivery in June tumbled 2% on Friday to settle the week at USD3.902 per million British thermal units.

Earlier in the session, Nymex gas prices fell to a session low of USD3.901 per million British thermal units, the weakest level since April 4.

The June contract lost 3.65% on the week, the third consecutive weekly decline.

Updated weather forecasting models pointed to mild temperatures sticking around for much of the U.S. in the coming weeks, indicating that heating and cooling demand will be very low for the next couple of weeks.

Gas use usually hits a seasonal low with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning.

Sentiment on the commodity remained downbeat following Thursday's bearish U.S. supply report, which showed that natural gas storage in the U.S. rose by 88 billion cubic feet, above expectations for an increase of 83 billion cubic feet.

Inventories rose by 30 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a rise of 69 billion cubic feet.

Total U.S. natural gas storage stood at 1.865 trillion cubic feet as of last week, 5% below the five-year average for this time of year.

Early injection estimates for this week's storage data range from 87 billion cubic feet to 108 billion cubic feet, compared to a more modest 56 billion cubic feet increase during the same week a year earlier.

The five-year average for the week is a build of 83 billion cubic feet.

Typically this time of year, stockpiles begin to climb as milder spring temperatures curb demand for natural gas.

Nymex gas prices have risen sharply in recent weeks, gaining almost 30% since mid-February, boosted by calls for colder temperatures in major consuming regions across the U.S. that helped tighten the market.

Gas futures rose to a 21-month high of USD4.442 per million British thermal units on May 1.

But prices have lost 12% since then, with some analysts warning of further losses with spring's low-demand shoulder season looming.

Elsewhere in the energy complex, light sweet crude oil futures for June delivery settled at USD95.94 a barrel by close of trade on Friday, adding 0.5% on the week.

Meanwhile, heating oil for June delivery advanced 0.7% over the week to settle at USD2.879 per gallon by close of trade Friday. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.
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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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