Forexpros – Natural gas futures were down in volatile trade on Monday, falling to a one-week low as investors readjusted positions ahead of the expiration of the front-month March contract, while ongoing concerns over mild weather and elevated inventories weighed.
On the New York Mercantile Exchange, natural gas futures for delivery in March traded at USD2.494 per million British thermal units during U.S. morning trade, tumbling 1.07%.
The March contract is due to expire at the end of Monday’s trading session.
Meanwhile, the more actively traded contract for April delivery plunged 1.99% to trade at USD2.642 per million British thermal units, the lowest since February 17.
The contract traded in a wide range of USD2.739, the daily high and USSD2.629, the session’s low.
Prices rallied sharply after the open, but then retraced those gains to turn lower. Contract expirations often lead to volatile trade as market participants look to close out positions or readjust their portfolios.
Natural gas traders continued to focus on mild winter weather and elevated inventory levels in the U.S., which have dampened sentiment on the heating fuel all winter.
Market participants expect further downward pressure on prices after the Commodity Weather Group said last week that March was forecast to be 13.5% warmer than March of last year.
The private forecaster said it sees milder-than-usual temperatures across virtually the entire eastern half of the U.S. in March, with much of the warmth focused on the Midwest, a major gas-consuming region.
The U.S. National Oceanic and Atmospheric Administration release a similar outlook, saying that it expected mostly above-normal temperatures in the eastern half of the U.S. from March 2 through March 8.
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.
Inventory withdrawals this winter are running nearly 510 billion cubic feet below average, or about 29%, due to the lack of heating demand this winter.
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 1.3 trillion cubic feet of storage gas has been burned this winter season, a 37% drop.
Total U.S. natural gas storage stood at 2.595 trillion cubic feet as of last week, 41% above year-ago levels and 40% higher than the five-year average for this time of year.
Early withdrawal estimates for Thursday’s storage data range from a decline of 80 billion cubic feet to 104 billion cubic feet, compared to last year’s drop of 85 billion cubic feet and the five-year average decline for the week of 118 billion.
Market analysts expect natural gas prices to retest January’s ten-year low of USD2.319 per million British thermal units, amid expectations U.S. gas inventories will end the winter at a record high 2.215 trillion cubic feet.
That’s 43% above the five-year average and well above the previous record of 2.148 trillion cubic feet set in 1983.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in April dropped 1% to trade at USD108.67 a barrel, while heating oil for April delivery fell 0.85% to trade at USD3.284 per gallon.
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