"The weather is colder than projected and the possibility of more colder weather coming around the corner have firmed up future prices," said Thomas Saal, senior vice president of energy at INTL FCStone in Miami. The contract had surged nearly 7 percent a day earlier, and posted its biggest weekly gain since December 2016, up more than 10 percent.
Thomson Reuters forecast US gas consumption will rise to an average of 135.9 billion cubic feet per day (bcfd) next week from 119.1 bcfd this week. The projection includes US exports to Mexico and Canada via pipeline and to the rest of the world as liquefied natural gas. US sales abroad were expected to average 9.9 bcfd this week, up about 32 percent from a year ago. "There are expectations that LNG exports to Mexico would continue to be strong and the economy appears to be strong as well, but the weather is the demand factor that could significantly change the pricing structure going forward," Saal added.
"Last winter was relatively mild, so the prices were relatively low the entire year." Prices settled 2017 down 20.8 percent after trading within a narrow range of $2.52 and $3.57 this year.
Total US natural gas production rose to a record in October, US Energy Information Administration data showed on Friday. Average production in the lower 48 US states over the past 30 days hit a record high of 76.7 bcfd, according to Reuters data.
However, daily output eased to 75.46 bcfd as of Friday, off the all-time high of 77.24 bcfd hit last week. The number of rigs drilling for natural gas in the United States fell by two this week to 182, data from oil services firm Baker Hughes showed on Friday.
"We are seeing record demand and with the arctic cold, it will reduce production," said Phil Flynn, an analyst with Price Futures Group in Chicago, adding that the gas wells will experience freeze offs, which could lead to a big withdrawal from storage next week. Analysts said US utilities probably pulled a higher-than-normal 204 billion cubic feet of gas from storage during the week ended on December 29.
That compares with a year-earlier decline of 76 bcf and a five-year average decrease of 99 bcf for that period. If correct, the decline would cut stockpiles to 3.128 trillion cubic feet, about 6 percent below the 3.318 tcf five-year average for this time of year.
US natural gas speculators boosted their net long positions for the first time in six weeks, by 9,709 contracts to 56,092 in the week to December 26, the US Commodity Futures Trading Commission said on Friday.