Natural gas futures - weekly outlook: January 27 - 31

                U.S. natural gas futures soared nearly 10% to hit a four-year high on Friday, as frigid temperatures and snowstorms struck from the Midwest to the East Coast for the second time this month, tightening supplies.

On the New York Mercantile Exchange, natural gas futures for delivery in February rallied 9.56% on Friday to settle the week at USD5.182 per million British thermal units. 

Earlier in the day, Nymex gas prices hit a session high of USD5.246 per million British thermal units, the strongest level since June 2010.

The February contract settled Thursday’s session up 0.87% to end at USD4.730 per million British thermal units.

Natural gas futures were likely to find support at USD4.813 per million British thermal units, the low from January 24 and resistance at USD5.246, the high from January 24. 

On the week, Nymex natural gas prices surged 16.5%, the second consecutive weekly gain and the largest increase in nearly three years, after updated weather forecasting models called for fresh blasts of cold air to sweep across the U.S. through the end of January.

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.

The U.S. Energy Information Administration said Thursday that natural gas supplies dropped by 107 billion cubic feet in the week ended January 17. 

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.

Wall Street investment bank Goldman Sachs lowered its forecast for inventory levels at the end of March to 1.39 trillion cubic feet earlier in the week, driven by the recent “polar vortex.” Goldman had previously estimated U.S. gas inventories at 1.61 trillion by the end of March.

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.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers increased their bullish bets in natural gas futures in the week ending January 21.

Net longs totaled 154,643 contracts, up 17.2% from net longs of 128,072 in the previous week.

Elsewhere in the energy complex, light sweet crude oil futures for March delivery settled at USD96.64 a barrel by close of trade on Friday, up 2.12% on the week. 

Meanwhile, heating oil for February delivery climbed 3.47% on the week to settle at USD3.137 per gallon by close of trade Friday. - investing.com