Forexpros – Natural gas prices resumed their downward trend on Wednesday, giving back some of the previous day’s gains as a bout of technical buying ebbed, while traders looked forward to Thursday’s key report on U.S. gas inventories.
On the New York Mercantile Exchange, natural gas futures for March delivery traded at USD2.466 per million British thermal units during U.S. morning trade, tumbling 2.65%.
It earlier fell by as much as 2.75% to trade at a session low USD2.462 per million British thermal units.
Prices rallied 4.2% on Tuesday as traders closed out bets on lower prices after futures moved into oversold territory, a move known as covering a short position.
However, concerns over elevated U.S. storage levels continued to weigh on the heating fuel. Official data released last week showed that total U.S. natural gas inventories fell by a weaker-than-expected 78 billion cubic feet to 2.888 trillion cubic feet, 32% above the five-year average for this time of year.
Early withdrawal estimates for Thursday storage data range from a decline of 100 billion cubic feet to 134 billion cubic feet, well below last year’s drop of 230 billion cubic feet and the five-year average decline for the week of 178 billion.
Inventory withdrawals this winter are running nearly 480 billion cubic feet below average, or about 33%, due to the lack of heating demand this winter.
Meanwhile, natural gas traders continued to monitor weather forecasts in key gas-consuming regions in the U.S. to gauge demand for the heating fuel.
Weather forecasters are predicting colder-than-normal temperatures across much of the U.S. West Coast and Rocky Mountain-region states in the next three-to-five-days.
However, milder temperatures were expected to return across most of the U.S. during the final two weeks of February.
Industry weather group MDA EarthSat forecast above-average temperatures across the U.S. East Coast over the next two weeks.
“There are still a greater number of warm signals than there are cold, making a strong, stable cold air mass unlikely,” the weather group said on Tuesday.
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.
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.
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.
However, market participants are reluctant to bet that prices will rise further amid a lack of production cut announcements from other major U.S. natural gas producers.
Traders said planned cuts so far were not enough to tighten a market seen oversupplied by as much as 3 billion cubic feet per day, or more than 4%.
Most analysts now expect gas inventories to end the winter at approximately 2.1 trillion cubic feet, 35% above average and near the all-time high for end-season storage of 2.148 trillion cubic feet set in 1983.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in April climbed 0.9% to trade at USD101.99 a barrel, while heating oil for March delivery rallied 1.25% to trade at USD3.204 per gallon.
Forexpros
