NEW YORK (Dow Jones)--Natural-gas futures settled higher Tuesday, rebounding from two-year lows as traders moved to lock in profits while investors try to determine whether the latest price slump is over.
Natural gas for January delivery settled 2.5 cents, or 0.8%, higher at $3.279 a million British thermal units on the New York Mercantile Exchange.
After three straight days of declines--sparked by record U.S. gas inventories for this time of year--investors that had bet on falling prices closed trades to lock in gains. The move was sparked by weather reports that showed slightly cooler temperatures ahead in the U.S., which could increase gas-fired heating demand.
"We've seen a shift back to a more moderate temperature outlook. It's not what we'd call bullish, but it's less bearish than yesterday," said Tim Evans, analyst with Citi Futures Perspective. Futures prices, he said, are "maybe low enough, for now, that you do see some profit taking off the short side of the market."
Forecaster MDA Earthsat said Tuesday that the temperatures over the next 11-to-15-day period have "shifted in the cooler direction" over all, though "extreme cold" is unlikely.
Mild weather this December across much of the U.S. and surging gas production have kept U.S. gas stockpiles near all-time highs and pushed down prices.
Last week, data from the U.S. Energy Information Administration showed gas stocks were at 3.831 trillion cubic feet, 2.7% above a year earlier and 8.7% above the five-year average for this time of year.
With so much gas in storage and weaker demand from homes and businesses for heating, traders have said the recent declines could continue.
Typically, December brings the first steady blasts of winter weather, starting to draw down inventories built up through autumn. Last week, however, stockpiles fell by just 20 billion cubic feet from the week-earlier period. A year ago, the drop was nearly 80 billion cubic feet.