Natural gas futures advanced Tuesday on the back of forecasts calling for warmer weather and fresh buying interest following declines last week.
Natural gas for August delivery recently traded up 8 cents, or 1.9%, to $4.391 a million British thermal units on the New York Mercantile Exchange.
Fresh buyers entered the market following Friday's decline of 1.4%, as forecasts called for warmer weather in the U.S. over the next several weeks, raising expectations for higher gas demand to meet cooling needs.
"What is shaping up to be a warmer-than-normal summer follows a colder-than-normal winter," writes Jim Ritterbusch, head of the trading advisory firm Ritterbusch and Associates. "These longer term weather patterns have forced a sizable supply deficit."
Forecaster MDA Earthsat is calling for warmer-than-usual temperatures in Texas and the Midwest over the next six to 10 days. The heat will eventually move eastward to the Northeast and Mid-Atlantic, the group said. Its 11-to-15-day forecast sees a "warm pattern overall" across the U.S.
Commodity Weather Group also sees above-average temperatures across the South and parts of the Central U.S. over the next 11 to 15 days.
Warmer temperatures often spur natural gas buying, particularly in the summer, as homes and businesses use the fuel to power air conditioning.
Natural gas futures have swung in a tight range between $4.20 and $4.40 per million British thermal units for much of the last week. A smaller-than-expected build in weekly U.S. inventories reported last week gave prices some momentum, but traders pared those gains Friday. The decline helped inspire fresh buying Tuesday, said Jay Levine, president of Enerjay LLC.
"Psychologically and technically, both crude and natural (gas) have stabilized and found support and found some admirers--in other words, buyers," Levine said.
Strong production, however, could keep a lid on prices. Last week, the Energy Information Administration said April production for the lower 48 states was at the highest levels in six years, at about 69 billion cubic feet of gas a day. Meanwhile, Baker Hughes Inc. reported the number of rigs drilling for gas in the U.S. rose last week by one.
Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $4.41/MMBtu, according to IntercontinentalExchange, up 8 cents from Friday's average. Natural gas for Wednesday delivery at Transcontinental Zone 6 in New York traded at $4.86/MMBtu, up 20 cents from Friday.