U.S. natural gas futures lost more than 1% on Friday, as market players continued to monitor near-term summer weather forecasts to gauge the strength of demand for the cooling fuel.

Updated weather forecasting models showed that above-normal temperatures in the U.S. East will give way to seasonal readings across most of the country from August 26 through September 4.

Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.

On the New York Mercantile Exchange, natural gas for delivery in September plunged 1.26%, or 4.9 cents, to settle at $3.840 per million British thermal units by close of trade on Friday.

Prices rallied to $3.955 on Thursday, the most since August 13. On the week, Nymex natural gas prices rose 1.66%, or 6.4 cents.

Futures were likely to find support at $3.780 per million British thermal units, the low from August 19 and resistance at $3.955, the high from August 21.

U.S. gas prices surged to a two-week high on Thursday as traders shrugged off bearish weekly storage data to focus on the possibility of hotter weather over the next two weeks.

The U.S. Energy Information Administration said Thursday that natural gas storage in the U.S. rose by 88 billion cubic feet last week, compared to expectations for an increase of 83 billion cubic feet.

Inventories rose by 58 billion cubic feet in the same week a year earlier, while the five-year average change is a build of 48 billion cubic feet.

Injections of gas into storage have surpassed the five-year average for 18 consecutive weeks, alleviating concerns over tightening supplies.

Total U.S. natural gas storage stood at 2.555 trillion cubic feet as of last week, narrowing the deficit to the five-year average to 17.3% from 18.9% a week earlier and down from a record 54.7% at the end of March.

The EIA's next storage report is slated for release on Thursday, August 28, with analysts expecting a build of 76 billion cubic feet for the week ending August 22.

Inventories rose by 65 billion cubic feet in the same week a year earlier, while the five-year average change is a build of 58 billion cubic feet.

Meanwhile, market players monitored tropical storm activity in the Gulf of Mexico. The National Hurricane Center said that an area of “shower and thunderstorm activity” east of the Windward Islands has a 70% chance of becoming a tropical system in the next five days.

Energy traders track tropical weather in the event it disrupts production in the Gulf of Mexico, home to 5% of U.S. natural gas output.

Data from the Commodities Futures Trading Commission released Friday showed that hedge funds and money managers significantly increased their bullish bets in natural gas futures in the week ending August 19.

Net longs totaled 21,507 contracts, up 86.5% from net longs of 2,897 in the previous week.

Elsewhere on the Nymex, crude oil for October delivery settled at $93.65 a barrel by close of trade on Friday, down 3.8%, or $3.70, on the week.

Meanwhile, heating oil for September delivery slumped 0.31% on the week to settle at $2.832 per gallon by close of trade Friday.

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