Natural gas demand to rise by 65% by 2040

Natural-gas prices on Thursday logged their highest close in more than two years as freezing temperatures throughout much of the U.S. boosted the demand outlook for the heating fuel, lifting prices for a fourth-straight session.

Oil futures, meanwhile, settled with a minor gain finding some support as a rise in U.S. retail sales buoyed the outlook for energy demand. But oil traders also continued to weigh price support from a hefty drop in weekly U.S. crude supplies against pressure from rising gasoline and distillate inventories.

January natural gas NGF14 -0.57%  rose 7 cents, or 1.7%, to settle at $4.409 per million British thermal units.

The close just barely topped the April 29, 2013 close of $4.408 to mark its highest since July 2011, FactSet data show.

The EIA reported Thursday that supplies of natural gas fell 81 billion cubic feet for the week ended Dec. 6. That was generally within market expectations as analysts polled by Platts were looking for a decline of between 79 billion cubic feet and 83 billion cubic feet.

The supply reduction came amid “strong consumption trends for the week ended Dec. 6, said Richard Hastings, a macro strategist at Global Hunter Securities, in a report Thursday.

He pointed out that “the strongest phase of the cold weather event did not materialize until the next day, extending into early in the week ending Dec. 13. “The severity of the daily temperature anomalies — for daily highs and lows … could contribute to a bigger draw when the EIA reports storage next Thursday,” said Hastings.

Oil’s minor move

Thursday saw a modest move for crude futures, with crude oil for January CLF4 -0.02%  delivery adding 6 cents, or 0.1%, to settle at $97.50 a barrel on the New York Mercantile Exchange.

 

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After Wednesday’s selloff “on whopping product builds (yet a huge lower-import sponsored draw to oil stockpiles), crude is steadying the ship, although upside would seem limited to the 200-day moving average at $98.60ish — which black gold has tickled in the last two days and has accordingly been slapped lower from,” said Matt Smith, author of energy and financial-market newsletter The Daily Distillation, wrote in a daily email.

On Wednesday, the U.S. Energy Information Administration reported that crude supplies fell by a bigger-than-expected 10.6 million barrels for the week ended Dec. 6. A Platts poll of analysts expected a fall of 2.8 million barrels.

But the government agency also reported a much-bigger-than-expected climb in weekly gasoline supplies along with an unexpected rise in distillate stockpiles, which include heating oil.

Nymex oil on Wednesday lost 1.1% as gasoline futures fell 0.8%.

On Thursday, January gasoline RBF4 -0.05%  shed almost 3 cents, or 1%, to $2.635 a gallon, while January heating oil HOF4 -0.14%  fell 4 cents, or 1.4%, at $2.98 a gallon.

The crude inventory drop failed to support crude-oil prices “as markets construed it more as a year-end phenomenon rather than signs of strong demand,” said ICICI Bank analysts on Wednesday.

Analysts have attributed the last two weeks of falling crude supplies to end-of-the-year “destocking” as companies look to shed taxable assets such as oil from their books before the end of the year.

Hints on demand

Economic data released Thursday offered some good news and some bad news on the energy demand outlook front.

“The U.S retail sales data has clearly showed that consumers are spending,” said Naeem Aslam, chief market analyst at AvaTrade. “Let’s not forget that the U.S. is the biggest consumer of oil in the world.”

Still, the upside for oil prices was tempered by the sharp increase in weekly jobless claims, he said.

Meanwhile, the fact that Libya may reopen some of its oil exporting ports weighed on Brent, according to the ICICI analysts.

On the ICE Futures exchange, Brent crude UK:LCOF4 -0.93%  fell $1.03, or 0.9%, to $108.67 a barrel.

 

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