(Updates prices, adds comment)
NEW YORK, Jan 13 (Reuters) - U.S. natural gas futures spiked over 5 percent early Monday, erasing steep losses from last week, as forecasts called for more cold than previously expected.
Changing forecasts ranging from extreme cold to warmer-than-average temperatures continue to bring volatility to the natural gas market, which is being driven most heavily by heating demand. The front-month contract saw its biggest percent loss since May 2 on Thursday followed by its biggest percent gain since April 29 on Monday.
MDA Weather Services forecast cold weather will move into the eastern half of the country over the next six to 10 and 11 to 15 days.
“The current forecasts suggests that heating-related demand may be higher than what the earlier weather forecasts have been projecting,” Dominick Chirichella, a partner at Energy Management Institute, said in a report.
“It should result in some modest price support if the forecasts do not flip-flop again and if the actual weather is in sync with the forecasts,” Chirichella said.
Front-month February gas futures on the New York Mercantile Exchange closed over 22.21 cents, or 5.45 percent, to $4.274 per million British thermal units, ending the day over the 10-day moving average.
In the ICE cash market, gas for Tuesday at Henry Hub GT-HH-IDX, the benchmark supply point in Louisiana, rose 24 cents to $4.19. Late trade differentials were at an 8-cent discount under NYMEX, weakening from Friday’s 7-cent discount.
Gas on the Transco pipeline at the New York citygate E-TSCO6NY-IDX rose 38 cents to $4.35, settling back to lower prices after reaching highs on last week’s record cold.
Early estimates for the weekly storage draw for the week ending Jan. 10 range from 250 billion cubic feet (bcf) to 339 bcf, which at the high end would top the 285 bcf record draw set in December.
EIA will release the weekly storage inventory report for this week on Thursday.
Last week, the EIA report showed weekly storage levels fell 157 bcf to 2.817 trillion cubic feet.
The number of rigs drilling for natural gas in the U.S. fell by 15 to 357 rigs this week, data from Baker Hughes showed on Friday. The count, however, remains above the 18-year low of 349 rigs hit in late June 2013.
In U.S. nuclear news, there were about 3,100 megawatts out on Monday, versus 3,000 MW on Friday. That compares with 8,300 MW out a year ago and a five-year average out of 6,500 MW. (Reporting by Scott DiSavino and Julia Edwards; Editing by Nick Zieminski)