Forexpros – Natural gas prices erased gains on Tuesday, retreating from a one-week high as traders shrugged off forecasts for cooler weather across most parts of the U.S., instead focusing on record high inventory levels which has dampened sentiment on the heating fuel in recent weeks.
On the New York Mercantile Exchange, natural gas futures for March delivery traded at USD2.482 per million British thermal units during U.S. morning trade, tumbling 2.65%.
It earlier rose by as much as 1.35% to trade at USD2.617 per million British thermal units, the highest since January 31.
Natural gas prices were boosted earlier after the Commodity Weather Group said earlier that it expected colder-than-normal temperatures to last into early next week for the U.S. east coast, while the U.S. Midwestern states should stay cooler longer into next week as well.
However, prices could not hold on to gains as traders said those expected brief periods of cold weather came far too late to dent the oversupply in the natural gas market.
Official supply data released last week showed that U.S. gas inventories remain at their highest level ever for this time of year.
Total U.S. natural gas storage stood at 2.966 trillion cubic feet as of last week, 25% above both year-ago levels and the five-year average for this time of year. In the prior week, the surplus was 21% above historical levels.
Early injection estimates for next week’s storage data range from a withdrawal of 78 billion cubic feet to 110 billion cubic feet, well below last year’s drop of 206 billion cubic feet and the five-year average decline for the week of 191 billion.
This is typically the coldest time in winter, but temperatures in the U.S. have yet to reach levels cold enough to boost demand for the heating fuel, keeping prices depressed at unseasonably low levels.
Winter so far in the U.S. has been the second mildest since 1950. It is running about 13% warmer than the 30-year normal, according to recent data from industry weather group MDA EarthSat.
Gas prices fell to USD2.319 per million British thermal units on January 20, the lowest since February 2002, before rebounding after a production-cut announcement by Chesapeake Energy sparked a massive short-covering rally.
However, optimism faded amid the lack of production cut announcements from other major U.S. natural gas producers. Exxon Mobil, the largest U.S. natural gas producer, said earlier in the week that it had no intention of curbing gas production.
With high levels of production continuing across the U.S., only a prolonged period of frigid weather in the last six weeks of winter is likely to reduce stockpile levels and raise prices. Inventory withdrawals this winter are running nearly 400 billion cubic feet below average, or about 30%.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in March climbed 0.8% to trade at USD97.69 a barrel, while heating oil for March delivery added 0.45% to trade at USD3.184 per gallon.
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