Natural gas futures resume rally after Monday’s rout

Investing.com - Natural gas futures regained ground on Tuesday, as investors returned to the market to seek cheaper valuations after prices fell by the most in nearly nine months on Monday.

On the New York Mercantile Exchange, natural gas futures for delivery in March surged to USD4.916 per million British thermal units, before trimming gains to trade at USD4.787 during U.S. morning trade, up 2.4%.

The March contract plunged 6.48% on Monday to end at USD4.674 as investors cashed out of the market to lock in gains from a furious rally that took prices to the highest level since February 2010.

Natural gas futures were likely to find support at USD4.650 per million British thermal units, the low from January 27 and resistance at USD5.199, the high from January 27 and the strongest level since February 2010.

Nymex natural gas prices rebounded after updated weather forecasting models called for fresh blasts of cold air to sweep across the U.S. through the end of January and into early February.

The U.S. National Weather Service said that it expected extreme cold conditions to continue in the heavily populated Midwest and Northeast over the next 14-days.

Bullish speculators spent the session betting that colder weather will increase demand for the heating fuel.

The heating season from November through March is the peak demand period for U.S. gas consumption. Approximately 52% of U.S. households use natural gas for heating, according to the Energy Department.

Total U.S. natural gas storage stood at 2.423 trillion cubic feet as of last week, approximately 13% below the five-year average for this time of year.

Natural-gas inventories have fallen by 1.411 trillion cubic feet since November 8 as frigid winter temperatures in the U.S. led households to burn a higher than normal amount of the fuel in furnaces to heat their homes.

Some expect supplies at the end of the winter heating season in March to be at their lowest in six years.

Early withdrawal estimates for this week’s storage data range from 170 billion cubic feet to 239 billion cubic feet, compared to a drop of 191 billion cubic feet during the same week a year earlier.

The five-year average change for the week is a decline of 162 billion cubic feet.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in March rose 0.75% to trade at USD96.43 a barrel, while heating oil for March delivery dipped 0.02% to trade at USD2.966 per gallon.