Forexpros – Natural gas prices were down sharply on Monday, trading close to a 28-month low as sentiment on the heating fuel was dampened after forecasts called for warmer-than-normal weather across the U.S. east coast in the coming week.
On the New York Mercantile Exchange, natural gas futures for February delivery traded at USD3.001 per million British thermal units during U.S. morning trade, tumbling 1.99%.
It earlier fell by as much as 2.2% to trade at a session low USD2.978 per million British thermal units. Prices fell USD2.934 on January 3, the lowest since September 2009.
Natural gas prices surged nearly 3.15% on Friday after the U.S. Climate Prediction Center said a long-term weather pattern that has kept milder air in the eastern U.S. showed indications of breaking up, signaling colder weather could be ahead.
However, industry weather group MDA Federal said earlier that much of the northern U.S. and East Coast were expected to be warmer-than-normal in the next six to ten days.
Temperatures in the region were expected to be 5 to 14 degrees Fahrenheit (2.8 to 7.8 Celsius) above normal, before a cold front moves in to the area in mid-January.
“The chill that arrives late-week in the Midwest will push into the East by the weekend and should get some reinforcing cold push from the North,” MDA said.
Natural gas futures 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.
Concerns over elevated inventory levels in the U.S. also added to selling pressure. Currently, total U.S. natural gas supplies stand at 3.472 trillion cubic feet as of last week, up 11.4% compared to the same week a year earlier.
Gas futures typically climb during the winter months, as temperatures fall and demand for heating fueled by natural gas rises. But mild winter weather coupled with high inventory and production levels in the U.S. have kept prices depressed near 28-month lows in recent weeks.
Wall Street investment bank Goldman Sachs lowered its average natural gas price forecast for 2012 to USD3.10 per million British thermal units, down from a previous estimate of USD3.70.
The bank said that U.S. storage levels were expected to hit an all-time high later this year.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in February fell 0.9% to trade at USD100.63 a barrel, while heating oil for February delivery shed 0.25% to trade at USD3.063 per gallon.
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