Forexpros – Natural gas prices fell to a ten-year low for the fifth consecutive day on Friday before turning modestly higher, though further downside was seen after prices broke below the key USD2.00-level for the first time in a more than a decade earlier in the week.

On the New York Mercantile Exchange, natural gas futures for delivery in May settled at USD1.990 per million British thermal units by close of trade on Friday. Prices are the lowest for this time of year since 1997.

On the week, prices tumbled 4.65%, the fourth consecutive weekly loss. Earlier in the day, prices fell to USD1.960 per million British thermal units, the lowest since January 2002.

Futures have been hitting a string of fresh 10-year lows over the past two weeks, as the bearish sentiment on the heating fuel remained intact amid ongoing concerns over waning demand and elevated U.S. storage and production levels.

The U.S. Energy Information Administration said in its weekly report Thursday 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.

Analysts had expected U.S. natural gas storage to rise by 25 billion cubic feet.

Inventories rose by 7 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a build of 22 billion cubic feet, according to U.S. Energy Department data.

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.

Prices initially rallied by more than 4% following the release of the smaller-than-expected supply build, however futures quickly retraced gains as traders sifted through the data.

According to the report, the increase was below expectations due to the reclassification of 10 billion cubic feet of gas as base gas, not working gas.

The EIA said that without that reclassification, the rise in the week would have been 18 billion cubic feet, dampening the markets initial optimism.

Working gas is the fuel that can be moved in or out of storage to meet fluctuations in the demand, while base gas must stay in storage facilities to provide pressure to allow normal operations.

Natural gas traders expect the near-term downtrend in prices to continue amid indications demand for the heating fuel will remain weak in the near-term.

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 week’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.

Some market participants are now expecting prices to fall to USD1.85 per million British thermal in the near-term and eventually test the all-time low of USD1.02 hit in 1992.

Natural gas prices have plunged almost 24% since the beginning of March and are down nearly 33% since the start of 2012 as market sentiment has been dominated for months by concerns over elevated U.S. storage levels and mild winter weather that has limited demand for the fuel.

U.S. gas inventories ended the winter at a record high 2.48 trillion cubic feet, about 60% above normal and well above the previous March 31 high of 2.148 trillion set in 1983.

The net withdrawal from storage in January was 545 billion cubic feet, the lowest for the month since 2006, while the U.S. National Oceanic and Atmospheric Administration said that last month was the warmest March ever recorded in the U.S.

Elsewhere in the energy complex, light sweet crude oil futures for May delivery traded at USD103.35 a barrel by close of trade on Friday, dipping 0.4% on the week, while heating oil for May delivery added 0.88% over the week to settle at USD3.180 per gallon by close of trade Friday.

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