Forexpros – Natural gas futures held on to losses on Thursday, halting a strong three-day rally despite a report from the U.S. Energy Information Administration showing that natural gas inventories declined significantly last week.
On the New York Mercantile Exchange, natural gas futures for delivery in March traded at USD2.676 per million British thermal units during U.S. morning trade, plunging 3.34%.
It earlier fell by as much as 3.85% to trade at USD2.667 per million British thermal units.
The March contract traded at USD2.685 prior to the release of the U.S. Energy Information Administration report.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended January 20 fell by 192 billion cubic feet, after declining by 87 billion cubic feet in the preceding week.
Analysts had expected U.S. natural gas storage to drop by 175 billion cubic feet.
Inventories fell by 184 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 173 billion cubic feet, according to U.S. Energy Department data.
Total U.S. natural gas storage stood at 3.098 trillion cubic feet as of last week. Stocks were 531 billion cubic feet higher than last year at this time and 547 billion cubic feet above the five-year average of 2.551 trillion cubic feet for this time of year.
The report showed that in the East Region, stocks were 202 billion cubic feet above the five-year average, following a withdrawal of 122 billion cubic feet.
Stocks in the Producing Region were 284 billion cubic feet above the five-year average of 837 billion cubic feet, after a net withdrawal of 43 billion cubic feet.
Natural gas prices rallied nearly 18.5% in the three sessions leading up to Thursday, after production-cut announcements by major U.S. natural gas producers sparked a massive short-covering rally.
Chesapeake Energy, which produces approximately 9% of U.S. natural gas, said earlier in the week that it will “immediately curtail” 0.5 billion cubic feet a day of gas production, or nearly 8% of its total output.
Also providing support were updates on production plans from Occidental Petroleum and ConocoPhillips.
Occidental Petroleum announced that it will cut back on pure gas drilling due to “horrible” natural gas prices and ConocoPhillips said it continues to limit investments in North American natural gas production.
Despite the strong three-day gain, natural gas prices are still down nearly 26% since the beginning of December, amid concerns over elevated inventory levels and mild winter weather in the U.S.
Last week, gas prices fell as low as USD2.322 per million British thermal units, the lowest since February 2002.
This is typically the coldest time in winter, but temperatures in the U.S. have yet to reach levels cold enough to boost demand for the heating fuel, keeping prices depressed at unseasonably low levels.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in March rose 1.35% to trade at USD100.73 a barrel, while heating oil for February delivery gained 1% to trade at USD3.049 per gallon.
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