Forexpros –
Forexpros – Natural gas futures hit another decade low Wednesday prior to bottom fishing speculators supporting the heating fuel and short position holders covering their trades offered support.
On the New York Mercantile Exchange, natural gas futures for delivery in May traded at USD1.970 per million British thermal units during U.S. afternoon trade, climbing 0.95%.
It earlier fell by as much as 0.65% to trade at USD1.940, the lowest since January 2002. Prices are the lowest for this time of year since 1997.
Natural gas futures have been hitting a string of fresh 10-year lows over the past two weeks, as market sentiment has been dominated by ongoing concerns over waning demand and elevated U.S. storage and production levels.
Prices plunged more than 3% on Tuesday as the bearish sentiment on the heating fuel remained intact.
The selling pressure carried over to Wednesday’s session, with futures slumping to a fresh ten-year low, before recovering as traders closed out bets on lower prices after futures moved into oversold territory, a move known as covering a short position.
Meanwhile, forecasts of warmer-than-normal weather across the U.S. west coast through next week provided further support, though the hot weather was not seen as significant enough to boost demand in the long-term.
Despite the technical bounce, natural gas traders expect the near-term downtrend in prices to continue, with some market participants expecting prices to fall to USD1.850 in the short-term and eventually testing the all-time low of USD1.020 hit in 1992.
The U.S. gas market is entering the so-called shoulder season. Gas use typically hits a seasonal low with spring’s mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning.
Early injection estimates for this Thursday’s storage data range from 19 billion cubic feet to 41 billion cubic feet, compared to last year’s build of 42 billion cubic feet. The five-year average change for the week is an increase of 26 billion cubic feet.
Weekly storage data from the U.S. released last week showed that natural gas storage in the U.S. rose by 8 billion cubic feet last week, the fourth consecutive seasonal injection of natural gas for the year.
Total U.S. natural gas storage stood at 2.487 trillion cubic feet as of last week, 56% above year-ago levels and almost 59% higher than the five-year average for this time of year.
Natural gas prices have plunged almost 25% since the beginning of March and are down nearly 35% since the start of 2012.
Meanwhile, researchers at Colorado State University said in a report that only four hurricanes are expected during this year’s storm season, further dampening sentiment on the fuel.
In total, the storm season that runs from June 1 to November 30 will produce 10 named systems, compared with 19 last year.
Energy traders track tropical weather in the event it disrupts production in the Gulf of Mexico. Production in federal waters in the Gulf accounts for about 10% of natural-gas output, and prices typically spike when storms threaten production.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in June gave back 1.64% to trade at USD102.92 a barrel on the supply numbers.
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