Natural gas futures for March ’15 Delivery rallied early Monday morning as the prospect of record-breaking cold in mid to late February drove natural gas bulls to the commodity. Approximately 50% of households in the U.S. use natural gas for heating.
After declining over 40% since their November highs, futures contracts for natural gas were up over 5 cents to $2.63 per mmBTu on Monday after settling Friday at a 32-month low of $2.579 per mmBTu.
The commodity sold off last week in anticipation of warmer temperatures this week. Some areas will see temperatures 10 to 15 degrees Fahrenheit above normal.
The gap up in natural gas futures comes at a critical point in the commodity’s pricing. Many commodity traders saw $2.50 per mmBtu as the floor for natural gas lows with some even predicting the level in December. As a result, natural gas traders and investors will look to see if the bullishness and breakout from its downward channel can hold throughout the early part of this week going into Thursday’s EIA Weekly Gas Storage report.
Last week’s EIA report indicated a withdrawal of -115 Bcf. A consensus estimate by analysts showed an expectation of -119 Bcf. The low withdrawal resulted in a sell-off of the commodity as storage levels stood only 29 Bcf from the five year average.
Natural gas traders and investors will be looking to this week’s storage report on Thursday at 10:30am EST for an increased withdrawal. Large winter storms in the Northeast drove heating demand in the area last week, but milder temperatures persisted in most of the rest of the continental U.S.
The five year average for the reporting period is -165 Bcf, and last year’s withdrawal was -230 Bcf. Natural gas prices have closed lower than their open after 9 of the last 10 reports.
The Baker Hughes Rig Count report is another metric traders and investors will look to on Friday at 1:00pm EST. Last week’s report showed a decline of 87 total U.S. rigs and 5 natural gas rigs. The decline of 5 natural gas rigs comes after a combined increase of 9 rigs in the past two weeks.
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