Forexpros – Natural gas futures snapped support at USD2.00 per BTU, hitting a ten-year low for the third consecutive day in late trade Wednesday, as traders continue to dump the heating fuel.
On the New York Mercantile Exchange, natural gas futures for delivery in May traded at USD1.98 per million British thermal units during U.S. afternoon trade, plunging 2.39%.
Natural gas prices came under pressure early in the session as the bearish sentiment on the heating fuel remained intact amid ongoing concerns over waning demand and elevated U.S. storage levels.
Futures have been hitting a string of fresh 10-year lows over the past two weeks.
Weekly storage data from the U.S. released last week showed that natural gas storage in the U.S. rose by 42 billion cubic feet last week, the third consecutive seasonal injection of natural gas for the year.
Total U.S. natural gas storage stood at 2.479 trillion cubic feet as of last week, 56% above year-ago levels and 61% higher than the five-year average for this time of year.
U.S. gas inventories ended the winter at a record high 2.5 trillion cubic feet, about 60% above normal and well above the previous March 31 high of 2.148 trillion set in 1983.
But prices recovered, moving off the ten-year low as traders closed out bets on lower prices after futures moved into oversold territory, a move known as covering a short position.
Natural gas prices have plunged almost 22% since the beginning of March and are down nearly 32% since the start of 2012 as market sentiment has been dominated by concerns over elevated U.S. storage levels and mild winter weather that has limited demand for the fuel.
According to the U.S. National Oceanic and Atmospheric Administration, last month was the warmest March ever recorded in the U.S. and current weather forecasts suggest temperatures are not likely to fall significantly again this season.
Industry weather group MDA Federal said in report Monday that warmer weather was expected to return to the eastern U.S. next week.
According to the weather group, temperatures may rise 8 to 14 degrees Fahrenheit (4.4 to 7.8 Celsius) above normal throughout the East from April 14 to April 18.
Also adding to the gloomy trade environment, the U.S. Energy Information Administration raised its estimate for marketed gas production this year for a third straight month.
In its Short-Term Energy Outlook published Tuesday, the agency said that it expected U.S. gas inventories to hit 3.923 trillion cubic feet by October, just short of capacity.
The EIA expects 2012 gas output to climb by 3 billion cubic feet per day, or 4.5%, to a record 69.22 billion cubic feet per day, up from its March outlook that had output this year at 67.91 billion cubic feet daily.
Some market analysts expect prices to test the key psychological USD2.00-level in the coming days amid expectations gas stockpiles will continue to rise throughout the next few months as demand weakens.
Early injection estimates for Thursday’s storage data range from 11 billion cubic feet to 45 billion cubic feet, compared to last year’s build of 7 billion cubic feet. The five-year average change for the week is an increase of 22 billion cubic feet.
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.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in May climbed 1.57% to trade at USD102.61 a barrel.
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