Forexpros – Natural gas futures fell to a ten-year low for the second consecutive day on Wednesday, as market participants looked ahead to Thursday’s U.S. government report on natural gas inventories, which was expected to show another supply injection.
On the New York Mercantile Exchange, natural gas futures for delivery in April traded at USD2.184 per million British thermal units during U.S. morning trade, slumping 0.68%.
It earlier fell to as low as USD2.16 per million British thermal units, the lowest since February 2002. The April contract is due to expire at the end of Wednesday’s trading session.
Meanwhile, the more actively traded contract for May delivery dropped 0.9% to trade at USD2.273 per million British thermal units.
The front-month contract fell to a ten-year low for the second consecutive day as market sentiment has been dominated for months by concerns over elevated U.S. storage levels and mild weather that has limited demand for the fuel.
Natural gas traders were looking forward to the U.S. Energy Information Administration’s closely-watched weekly report on natural gas inventories due Thursday.
The data was expected to show a build of 49 billion cubic feet, the second injection of natural gas for the year, compared to the five-year average decline for the week of 8 billion. Supplies rose by 7 billion cubic feet in the same week a year earlier.
Natural gas traders expect the near-term downtrend in prices to continue amid indications demand for the heating fuel will remain weak in coming weeks.
Latest forecasts from the National Oceanic and Atmospheric Administration show above-normal temperatures covering most of the U.S. into early April, while a large portion of the eastern U.S. will see that weather pattern through June.
The Commodity Weather Group offered a similar outlook, saying that the unusually warm temperatures which have lingered across the U.S. throughout March are expected to last through the next six-to-10 days before cooler weather patterns emerge.
Some technical selling also weighed, as market participants noted that the drop below recent lows may have provided motivation for technical traders to continue selling.
Market analysts expect prices to drop even further and test the USD2.00-level amid expectations U.S. gas inventories will end the winter at a record high 2.45 trillion cubic feet, well above the previous high of 2.148 trillion set in 1983.
Total U.S. natural gas storage stood at 2.380 trillion cubic feet as of last week, 47% above year-ago levels and 54% higher than the five-year average.
Weekly storage data from the U.S. released last week showed the earliest build in U.S. gas supplies since 2007. The build came about two weeks earlier than usual.
Natural gas prices have plunged almost 13% since the beginning of March and are down nearly 24% since the start of 2012.
Deutsche Bank on Tuesday lowered its 2012 natural gas price forecasts to USD2.75 per million British thermal units to reflect an increase in supply versus a drop in demand.
The bank said prices may improve in the second half of 2012, as supply may fall due to recently announced production cuts and demand may increase as the U.S. economy picks up.
The bank also downgraded its 2013 price outlook to USD3.75 per million British thermal units.
“Our revision reflects the sluggishness of the supply response to low gas prices, persistently high storage levels and a mild winter that contributed to prices falling below and holding below USD3.00,” the report said.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in May plunged 2% to trade at USD105.20 a barrel, while heating oil for May delivery shed 0.7% to trade at USD3.213 per gallon.
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