Investing.com - U.S. natural gas prices extended last week's furious rally on Monday to hit a three-week high as updated forecasts for January turned cooler.
The U.S. Northeast and Midwest will see below-normal temperatures through January 7. Bullish speculators are betting on the cool winter weather to increase demand for the heating fuel. The heating season from November through March is the peak demand period for U.S. gas consumption.
Natural gas for delivery in February on the New York Mercantile Exchange jumped 6.8 cents, or 3.29%, to trade at $2.147 per million British thermal units during U.S. morning hours. It earlier touched $2.168, the most since December 4.
Heading into the final week of the year, trading volumes are expected to remain light as many traders already closed books, reducing liquidity in the market which could result in exaggerated moves.
Natural gas futures soared 26.2 cents, or 12.91%, last week, the biggest weekly gain in 22 months, as forecasts called for a return to cool weather, following a warm spell which took prices to the lowest level since March 1999 earlier this month. Prices fell to a 17-year low of $1.684 on December 18.
Natural gas typically rises ahead of the winter as colder weather sparks heating demand, yet an unusually mild start to winter due to the El Niño weather phenomenon has limited the amount of heating days.
Prices of the fuel are down nearly 30% so far this year, as weak demand and healthy stockpiles weighed.
Total U.S. natural gas storage stood at 3.814 trillion cubic feet, 14.7% higher than levels at this time a year ago and 10.8% above the five-year average for this time of year.
The U.S. Energy Information Administration's next storage report slated for release on Thursday, December 31 is expected to show a withdrawal of approximately 45 billion cubic feet for the week ending December 25.
That compares with a drawdown of 32 billion cubic feet in the prior week, 26 billion cubic feet in the same week last year, while the five-year average change for the week is a drawdown of 98 billion cubic feet.
Elsewhere on the Nymex, crude oil for delivery in February slumped $1.01, or 2.65%, to trade at $37.09 a barrel, while heating oil for January delivery slipped 1.5% to trade at $1.084 per gallon.