Natural gas futures - Weekly outlook: January 2 - 6

Forexpros - Natural gas prices traded below USD3.00-per-British-thermal-units for the first time in more than two years on Friday, as forecasts for mild winter weather in the U.S. and lingering concerns over elevated inventory levels continue to dampen sentiment on the heating fuel. On the New York Mercantile Exchange, natural gas futures for delivery in February settled at USD2.966 per million British thermal units by close of trade on Friday, tumbling 5.45% over the week. Prices fell to USD2.955 earlier Friday, the lowest since September 11, 2009, when futures last traded below the psychologically-important level of USD3.00. It was the first time in nearly a decade that the front-month contract settled below USD3.00 during the winter. Natural gas prices plunged 32% in 2011, as high U.S. inventories and increasing domestic natural gas production weighed on prices. With most investors away on year-end leave, trading volumes were thin, resulting in tight liquidity conditions and irregular volatility. The NYMEX floor session will remain closed on Monday for the New Year's holiday. Natural gas prices tumbled 2% on Friday as most weather forecasts continued to point to warmer-than-normal temperatures across most parts of the northern half of the U.S. through early January, dampening hopes for a pick up in heating demand. Prices have closely tracked weather forecasts in recent weeks. Above-normal winter temperatures reduce the need for gas-fired electricity to heat homes, dampening demand for natural gas. Natural gas futures retreated 3% on Thursday after the U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. fell by 81 billion cubic feet in the preceding week, falling short of expectations for a decline of 89 billion cubic feet. Stocks fell by 143 billion cubic feet the same week a year earlier, while the five-year average change for the week is a drop of 122 billion cubic feet, according to U.S. Energy Department data. Total U.S. natural gas storage stood at 3.548 trillion cubic feet as of last week. Stocks were 297 billion cubic feet higher than last year at this time and 428 billion cubic feet above the five-year average of 3.120 trillion cubic feet. Gas futures typically climb during the winter months, as temperatures fall and demand for heating fueled by natural gas rises. But mild weather coupled with high production levels have kept prices depressed in recent weeks. Futures dropped nearly 15% in December alone, as warmer-than-normal winter weather limited heating demand. Elsewhere on the NYMEX, light sweet crude oil futures for February delivery traded at USD98.89 a barrel by close of trade on Friday, shedding 0.95% on the week, while heating oil for February delivery eased up 0.1% over the week to settle at USD2.910 per gallon by close of trade Friday. On the year, crude prices rose 8.2%, the third consecutive annual gain, while heating oil saw prices rally 16%. &nb
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