Forexpros – Natural gas futures came under heavy selling pressure on Monday, re-approaching a ten-year low hit earlier in the month as sentiment on the heating fuel remained downbeat amid ongoing concerns over elevated U.S. supply levels.
On the New York Mercantile Exchange, natural gas futures for delivery in April traded at USD2.244 per million British thermal units during U.S. morning trade, tumbling 1.75%.
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 1.45% to trade at USD2.338 per million British thermal units.
The front-month contract fell to USD2.208 per million British thermal units on March 13, the lowest since February 2002, 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.
Weekly storage data from the U.S. released last week showed that natural gas storage in the U.S. rose by 11 billion cubic feet last week.
The build came about two weeks earlier than usual and was the earliest seasonal increase in stored supplies since 2007.
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.
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.
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.
Some market analysts expect prices to fall to fresh 10-year lows as early as this Wednesday, when the front-month April contract expires, while other believe prices will 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.
Early injection estimates for next week’s storage data range from 43 billion cubic feet to 58 billion cubic feet, 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 prices have plunged almost 13% since the beginning of March and are down nearly 24% since the start of 2012.
Market participants noted that April is considered a transition month for natural gas.
Futures contracts tend to trade more lightly during spring months because demand for heating is weak and natural gas-fueled power plants have yet to step up production to serve air conditioners.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in May added 0.2% to trade at USD107.06 a barrel, while heating oil for May delivery rose 0.4% to trade at USD3.237 per gallon.
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