Natural gas futures jumped Monday, lifted by last week's steep sell-off and forecasts calling for warmer-than-usual weather in parts of the U.S.
Natural gas for October delivery settled up 8.1 cents, or 2.2%, to $3.782 a million British thermal units on the New York Mercantile Exchange.
Gas futures ended higher as traders took last week's declines as an opportunity to snap up fresh contracts on the cheap. Front-month futures fell 2.8% last week, hitting an 11-month low of $3.662 Thursday, in a market-wide rout spurred by concerns about the global economic slowdown.
"After we bounced off the lows we saw a bit of buying interest coming in," said Matt Smith, analyst at Summit Energy in Louisville, Ky.
In addition, Smith said, forecasts pointing to unseasonably warm weather in parts of the country likely spurred buying as well. Texas and the Southwest, key areas for natural-gas-fueled air conditioner use, should see above-normal temperatures in the coming days, according to Commodities Weather Group. Early heating demand in the Midwest and East Coast could also trigger demand, the private forecaster said.
To be sure, natural gas traders are bracing for lower prices ahead. Weather isn't likely to be a major driver for gas prices in the coming weeks as the market enters the autumn "shoulder period." That's the time of year characterized by sluggish demand, as summer cooling needs wane but winter heating demand has yet to kick in.
Gas futures have already fallen sharply from their summer highs. The contract peaked for the year at nearly $5 per million Btu in June, and hasn't traded above $4 since Sept. 14.
Elevated production levels and a mild hurricane season have also weighed on prices. Futures could fall even further if the Department of Energy reports another large build in natural gas inventories in its weekly survey due Thursday, analysts said.
"Nat gas has bounced a bit today, but the bulls should not get confident," trading advisory firm Gelber and Associates said in a research report.