HOUSTON--Natural gas futures moved higher Friday amid expectations for an economic recovery that will spur additional demand for the fuel.
Natural gas for June delivery on the New York Mercantile Exchange recently traded 11.9 cents higher, or 2.92%, at $4.20 a million British thermal units. The contract opened floor trade 10.4c higher at $4.081/MMBtu.
Futures were finding support Friday after the release of a U.S. Labor Department report showed that nonfarm payrolls fell by 539,000 in April - slightly better than Wall Street expectations and the smallest decline in six months.
"There is an expectation that that is going to feed through on the residential and industrial demand side," said Cameron Horwitz, an analyst with SunTrust Robinson Humphrey in Houston.
Natural gas prices have been pressured lower over the last several months as the U.S. recession cut into demand for the fuel. Prices have plunged, falling about 70% since hitting a peak last summer above $13/MMBtu.
Analysts say an economic rebound would bolster the industrial demand for the fuel, which accounts for about one third of U.S. consumption.
"Buyers are obviously coming in sensing that we've seen the bottom and better get long at today's prices. We should have some typical short covering, especially since it's Friday and the results of the Banks' Stress Tests are out of the way," wrote Drew Wozniak, an analyst with ICAP Energy in Louisville, Ky.
Meanwhile, market watchers are also anticipating that the brisk pullback in U.S. drilling activity resulting from the decline in gas prices will begin slowing robust domestic gas production.
The number of rigs drilling onshore for natural gas has fallen by more than half since September and the slowdown should begin to stem the flow of gas into the oversupplied natural gas market, analysts said.
However, natural gas storage levels are still stand in surplus to both last year and the five year average.
"Hard to see how any meaningful gas rally can be sustainable though the summer," analysts with Houston-based Tudor Pickering Holt & Co. Securities Inc. wrote in a note to clients, noting that there was "too much gas."
-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com