U.S. GAS: Futures Extend Losses on Storage Report

Natural gas futures extended their earlier losses Thursday after a report of a slightly smaller-than-expected weekly draw from U.S. gas stockpiles reinforced the view that supplies will be ample to meet winter's heating needs.

Natural gas for February delivery recently traded 11.7 cents, or 2.6% lower, at $4.414 a million British thermal units on the New York Mercantile Exchange. The benchmark contract had traded at about $4.48/MMBtu before the report's release.

The U.S. Energy Information Administration reported that natural gas inventories fell by 138 billion cubic feet last week, less than consensus estimates for a withdrawal of 142 bcf in a Dow Jones Newswires survey.

Natural gas in U.S. storage during the week ended Jan. 7 stood at 2.959 trillion cubic feet. The storage draw was larger than the five-year average withdrawal of 108 bcf, but less than last year's decline of about 250 bcf. Market participants pay close attention to these reports because they provide an indicator of the balance between gas supplies and demand.

The benchmark contract has ended higher for two consecutive days, as forecasters predicted the cold weather across much of the U.S. may linger into the last week of January. But a slightly warmer outlook Thursday provided an opportunity for market participants to cash out after those gains.

Confidence in the forecasts for the end of January "has dropped off again today after a series of warmer trends" in forecasting models, meteorologists with MDA EarthSat said. The private forecaster still sees colder-than-normal temperatures Jan. 23-27 across much of the eastern half of the U.S., with warmer weather in the western half of the country.

Inventories last week were about 5.8% above the five-year average, according to the EIA, down from about 10% higher than average in November.