Forexpros – Natural gas futures edged higher on Tuesday, as traders closed out bets on lower prices to lock in gains following the previous session’s 5% plunge, but most market participants expected prices to retest a ten-year low hit in late-January.
On the New York Mercantile Exchange, natural gas futures for delivery in April traded at USD2.369 per million British thermal units during U.S. morning trade, adding 0.62%.
It earlier rose by as much as 1.5% to trade at a session high of USD2.394 per million British thermal units.
Natural gas prices lost 5.2% on Monday to settle at USD2.348. But prices regained modest strength as traders covered short positions, or bets that prices will fall, a move known as short covering.
Investors also positioned themselves in case major U.S. natural gas producers announce a production cut in response to lower prices.
Gas prices fell to USD2.319 per million British thermal units on January 20, the lowest since February 2002, before rebounding after a production-cut announcement by Chesapeake Energy sparked a massive short-covering rally.
Market analysts expect natural gas prices to retest January’s ten-year low amid expectations U.S. gas inventories will end the winter at a record high 2.2 trillion cubic feet.
Early withdrawal estimates for next week’s storage data range from a decline of 66 billion cubic feet to 95 billion cubic feet, compared to last year’s drop of 63 billion cubic feet and the five-year average decline for the week of 92 billion.
Meanwhile, weather forecasts pointed to mild March weather which was expected to limit demand for the heating fuel.
The Commodity Weather Group said on Monday that average temperatures from Montana to Massachusetts were expected to be 8 degrees higher than normal from March 10 to March 14.
The weather forecaster added that it sees no change to a “super-warm” outlook for the next 11-to-15-days, with the entire continental U.S. except for the west coast expecting much higher-than-normal temperatures.
Winter so far in the U.S. has been the second mildest since 1950. It is running about 13% warmer than the 30-year normal, according to recent data from MDA EarthSat.
With only 16 days left to go in the U.S. winter, the surplus of natural gas in inventory is continuing to grow, keeping gas prices on the defensive until summer cooling loads kick in.
Last winter at this time, cold weather conditions led to a decline of more than 2 trillion cubic feet from U.S. storage to help meet the surge in heating demand.
In contrast, only 1.4 trillion cubic feet of storage gas has been burned this winter season, a 36% drop.
Natural gas prices lost nearly 8% last week, the biggest weekly drop since early February and are down almost 16% in the past nine trading sessions.
Market participants noted that April is considered a transition month for natural gas.
Futures contracts tend to trade more lightly during spring months because demand for heating is weak and natural gas-fueled power plants have yet to step up production to serve air conditioners.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in April fell 1.15% to trade at USD105.48 a barrel, while heating oil for April delivery dipped 0.2% to trade at USD3.210 per gallon.
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