Early Winter Ensures Higher Natural-Gas Prices ..

NEW YORK (Dow Jones)--Natural gas futures settled slightly higher Friday as forecasts for cold weather in the coming week outweighed pressure from ample supplies.
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Natural gas for January delivery settled 0.6 cent, or 0.1% higher, at $4.349 a million British thermal units on the New York Mercantile Exchange. Futures rose for the third consecutive session, but fell 1.1% on the week.
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Forecasters continue to see cold across much of the eastern half of the U.S. beginning this weekend and extending through next week. The below-normal temperatures should blanket major heating markets in the Midwest and Northeast, as well as the Southeast, meteorologists with MDA EarthSat said Friday.
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Natural gas prices have been bound in a narrow range since late October, rising when forecasts called for colder temperatures and a boost to gas-heating demand, but frequently unable to hold on to gains amid high inventories. Futures would likely have to break above $4.50/MMBtu to prove that a seasonal advance was on, said Jimmy Tintle, an analyst with Transworld Futures. Prices can rise sharply in anticipation of winter's heating demand.
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The Energy Information Administration said Thursday that 23 billion cubic feet of gas was withdrawn from storage last week. The decline was smaller than the expected 26-bcf decline, but nevertheless represented the first substantial draw this season. With meteorologists in good agreement on an early-December cold snap, larger withdrawals are seen in the coming weeks.
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The amount of gas in storage typically increases from April to November, before winter's home-heating needs begin to draw from the excess supply.
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Natural gas inventories as of Nov. 26 stood at 3.814 trillion cubic feet, 10% above the five-year average, the EIA reported. Stockpiles earlier in the month climbed to a record high of 3.843 tcf.
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Meanwhile, U.S. drilling activity has held steady despite low prices. The number of rigs drilling for natural gas increased by eight this week, to 961, according to oil-field services company Baker Hughes Inc. (BHI), a 28% increase from the same week last year. Some analysts have predicted this year that gas producers would cut back on drilling to limit supply growth and protect their profitability, but market-moving declines haven't materialized.
.-By Matt Day, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com
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(END) Dow Jones Newswires
December 03, 2010 15:19 ET (20:19 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.- - 03 19 PM EST 12-03-10
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