Forexpros – Last week saw natural gas prices fall to the lowest level since September 2009 as forecasts for warmer-than-normal winter weather in the U.S. continued to underline the view that gas supplies are more than ample to meet U.S. winter-heating needs.
On the New York Mercantile Exchange, natural gas futures for delivery in January settled at USD3.127 per million British thermal units by close of trade on Friday, dropping 3.78% over the week.
Prices fell to USD3.084 earlier Friday, the lowest since September 11, 2009, when futures last traded below the psychologically-important level of USD3.00.
The January natural gas contract has lost nearly 13% since the beginning of December, as record high storage levels in the U.S. and forecasts of warm December weather drove down prices.
Natural gas futures were largely unchanged on Friday as most weather forecasts continued to point to warmer-than-normal temperatures across most parts of the northern half of the U.S. and the eastern seaboard through December 23.
Natural gas prices have closely tracked weather forecasts in recent weeks. Above-normal winter temperatures reduce the need for gas-fired electricity to heat homes, dampening demand for natural gas.
However, prices found some support after industry research group Baker Hughes said that the number of active rigs drilling for natural gas in the U.S. fell by two to hit a 23-month low of 818, the seventh consecutive weekly decline.
Natural gas traders closely watch the rig count to gauge future supply growth. The rig count has dropped sharply in recent months, but the current level of activity is still widely expected to lead to further production gains.
According to global financial service provider Barclays, natural gas prices were expected to remain under pressure in the near-term, as a combination of robust production and tepid demand have led to a supply glut.
The lender said in a report Friday that despite a larger-than-expected draw on inventories in the most recent U.S. report on gas storage Thursday, the near-term weather outlook “remains disappointing for those who are waiting for seasonal gas heating demand to strengthen.”
Natural gas prices edged modestly lower on Thursday as the outlook for prolonged warmer-than-normal temperatures outweighed a drop in inventories.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. fell by 102 billion cubic feet in the preceding week, outstripping expectations for a decline of 89 billion cubic feet.
The drawdown was still significantly lower than the five-year average decline of 142 billion cubic feet. Supplies declined by 154 billion cubic feet in the same week a year earlier.
Total U.S. natural gas storage stood at 3.729 trillion cubic feet as of last week, up 5% from a year earlier and a record high for this time of year.
Gas futures typically climb during the winter months, as temperatures fall and demand for heating fueled by natural gas rises. But mild weather coupled with high production levels have kept prices depressed in recent weeks.
Elsewhere on the NYMEX, light sweet crude oil futures for January delivery traded at USD94.08 a barrel by close of trade on Friday, tumbling 5.57% on the week, while heating oil for January delivery lost 3.73% over the week to settle at a six-week low of USD2.807 per gallon by close of trade Friday.
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