Bullish inventory data released Thursday pointing to rising U.S. natural gas demand provided further support.
On the New York Mercantile Exchange, natural gas futures for delivery in August settled at USD3.091 per million British thermal units by close of trade on Friday. Earlier in the day, prices hit USD3.094, the highest since January 5.
On the week, the front-month natural gas contract rose 7.1%, the fifth weekly gain in the past six weeks.
A bout of hot weather across much of the country over the last several weeks helped boost natural gas prices. Spot prices have rallied nearly 30% in the past five weeks, as extreme heat conditions across the U.S. boosted cooling demand for the fuel.
The recent gains helped push natural gas futures into positive territory for 2012. The fuel is now up 3.5% in 2012. Concerns over bloated inventories and weak winter demand dragged prices down to a decade low of USD1.907 per million British thermal units on April 19.
Weather service provider AccuWeather said Friday that it expected temperatures in the U.S. Northeast and Midwest to warm to above normal next week, with highs hovering in the 90-degree-Fahrenheit-level.
Warmer-than-normal temperatures increase the need for gas-fired electricity to power air conditioning, boosting demand for natural gas. Natural gas accounts for about a quarter of U.S. electricity generation.
Prices also drew support from Thursday’s weekly U.S. government supply report, which was viewed as “bullish” by market players.
The U.S. Energy Information Administration said in a report that natural gas storage in the U.S. rose by 28 billion cubic feet last week, below market expectations for an increase of 34 billion cubic feet.
Inventories rose by 67 billion cubic feet in the same week a year earlier, while the five-year average change for the week is an increase of 74 billion cubic feet, according to U.S. Energy Department data.
Total U.S. gas supplies stood at 3.163 trillion cubic feet last week, narrowing the surplus to last year’s level to 19.2%. Gas supplies are only 17.5% above the five-year average level for the week, down from a surplus of as high as 60% earlier in the year.
However, concerns over U.S. supply levels remain. U.S. gas inventories did not hit the milestone 3 trillion cubic feet level until August 31 of last year. Stocks peaked last year in November at a record 3.852 trillion cubic feet.
Market analysts have warned that without strong demand through the rest of the summer, gas inventories will reach the limits of available capacity later this year.
The storage surplus to last year will have to be cut by at least another 260 billion cubic feet in the 17 weeks left before winter withdrawals begin to avoid breaching the government's 4.1 trillion cubic feet estimate of total capacity.
Early injection estimates for this week’s storage data range from 21 billion cubic feet to 50 billion cubic feet, compared to last year's build of 48 billion cubic feet. The five-year average change for the week is an increase of 61 billion cubic feet.
From a technical standpoint, market participants noted that prices have further room to move higher after futures closed above the key USD3.00-level for the first time since January.
Chart watchers said prices could rally to as high as USD3.24 in the near-term.
Elsewhere in the energy complex, light sweet crude oil futures for September delivery traded at USD91.59 a barrel by close of trade on Friday, jumping 4.45% on the week.
Heating oil for August delivery rose 4.6% over the week to settle at USD2.923 per gallon by close of trade Friday.
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