Forexpros – Natural gas prices declined in thin trade on Wednesday, re-approaching the lowest level since September 2009 as forecasts for colder-than-normal winter weather in the U.S. next week appeared to be short-lived.
On the New York Mercantile Exchange, natural gas futures for February delivery traded at USD3.116 per million British thermal units during U.S. morning trade, tumbling 1.06%.
It earlier fell by as much as 1.5% to trade at USD3.106 per million British thermal units, the lowest price since December, when prices fell to a 27-month low of USD3.050.
Trading volumes remained light following the Christmas break, as many traders have closed books before the end of the year, reducing liquidity in the market and increasing volatility.
Sentiment on the heating fuel was dampened after weather forecasts called for a cold spell along the U.S. East Coast in the next six-to-10 days, but that warmer-than-normal temperatures were expected to return after that.
The Commodity Weather Group called the coming chill a “quick cold shot,” but added that, “The fast movement of the event will prevent any long-term impacts.”
Natural gas prices have closely tracked weather forecasts in recent weeks. Below-normal winter temperatures increase the need for gas-fired electricity to heat homes, boosting demand for natural gas.
Approximately 52% of U.S. households use natural gas for heating, according to the Energy Department.
Lingering concerns that U.S. natural gas inventories were ample to meet the needs of even an unusually cold winter also weighed.
Total U.S. natural gas storage stood at 3.629 trillion cubic feet as of last week, 11.9% above the five-year average for this time of year.
The January natural gas contract has lost nearly 15% since the beginning of December, trading close to a 27-month low in recent sessions, as record high storage levels in the U.S. and forecasts of warm December weather drove down prices.
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 delivery in February dropped 1.02% to trade at USD100.31 a barrel, while heating oil for February delivery added 0.43% to trade at USD2.928 per gallon.
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