Natural gas futures - weekly outlook: January 20 - 24

Investing.com - U.S. natural gas futures declined on Friday, as investors locked in gains from the previous session’s strong rally which took prices to the highest closing level of the year.

On the New York Mercantile Exchange, natural gas futures for delivery in February fell 1.28% on Friday to settle the week at USD4.326 per million British thermal units.

The February contract rallied to USD4.495 per million British thermal units on Thursday, the highest since December 23, before trimming gains to settle at USD4.382.

Natural gas futures were likely to find support at USD4.208 per million British thermal units, the low from January 3 and resistance at USD4.495, the high from January 16.

On the week, Nymex natural gas prices surged 6.31%, the first weekly gain in four weeks.

Nymex gas prices rallied on Thursday after the U.S. Energy Information Administration natural gas supplies dropped by a record-high 287 billion cubic feet in the week ended January 10.

The previous record drop was a decrease of 285 billion cubic feet in the seven days ended December 13, Energy Information Administration data show.

Total U.S. natural gas storage stood at 2.530 trillion cubic feet as last week, approximately 15% below the five-year average for this time of year.

Natural-gas inventories have fallen by 1.3 trillion cubic feet, or 34%, 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.

Colder-than-normal temperatures are expected to return next week, boosting demand for the heating fuel. According to MDA Weather Services, a wave of cold air will push temperatures from the Midwest to the East Coast to below-normal readings from January 21 through January 30.

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.

The CFTC Commitments of Traders report for the week ending January 14 showed that gross long natural gas positions increased by 6,476 contracts to 152,876, while gross short positions rose by 2,114 contracts to 238,929. Net shorts totaled 86,053 contracts, compared to 90,415 in the previous week.

Elsewhere in the energy complex, light sweet crude oil futures for March delivery settled at USD94.59 a barrel by close of trade on Friday, up 1.97% on the week.

Meanwhile, heating oil for February delivery climbed 2.6% on the week to settle at USD3.028 per gallon by close of trade Friday.

Floor trading will be closed on Monday and there will be no settlement on the New York Mercantile Exchange due to the Martin Luther King, Jr. Day holiday.