Forexpros – Natural gas futures moved lower during U.S. afternoon hours Tuesday, as the previous day’s almost 7% rally which took prices to a three-week high prompted profit taking in the wake of the bullishness.

On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.564 per million British thermal units during U.S. morning trade, tumbling 2.69%.

It earlier fell by as much as 2.75% to trade at a session low of USD2.564 per million British thermal units.

Prices surged 6.8% on Monday to hit USD2.671, the highest since May 25. Prices added to the previous week’s rally as sentiment on the fuel has improved since last Thursday’s storage data.

Natural gas prices soared 14% on June 14, the largest one-day gain in more than two years after the U.S. Energy Information Administration said that natural gas storage in the U.S. rose by 67 billion cubic feet last week, below market expectations for an increase of 75 billion cubic feet.

The smaller-than-expected increase indicated that demand for the fuel is better-than-expected and suggested that demand for natural gas among power utilities remains strong.

The weekly gas report has been “bullish” in nine of the past 10 weeks, raising expectations that record-high storage can be trimmed to more manageable levels in the 22 weeks left before winter withdrawals begin.

Early injection estimates for this week’s storage data range from 47 billion cubic feet to 72 billion cubic feet, compared to last year’s build of 90 billion cubic feet. The five-year average change for the week is an increase of 87 billion cubic feet.

Warmer-than-normal weather forecasts across most parts of the U.S. in the coming week provided further support.

The National Weather Service’s six- to 10-day outlook issued on Sunday called for above-normal readings for most of the U.S., with below-normal readings along the West Coast and in New England.

Meanwhile, industry weather group MDA Federal said that the U.S. Midwest and Northeast were expected to see their first period of summer heat this week.

Warmer-than-normal temperatures increase the need for gas-fired electricity to power air conditioning, boosting demand for natural gas. Natural gas accounts for about a quarter of U.S. electricity generation.

Indications that North American gas producers were cutting back on production in response to lower prices also contributed to recent gains.

Industry research group Baker Hughes said on Friday that the number of active rigs drilling for natural gas in the U.S. last week fell by three to 562, the lowest since September 1999.

The gas rig count is nearly 40% below last year’s level, fuelling hopes that major North American natural gas producers were beginning to curb output in response to declining prices.

Despite lower production levels, U.S. gas inventories remain at a record high for this time of year, after one of the warmest winters on record reduced demand for the heating fuel during its peak season.

The start of the Atlantic hurricane season has been providing additional support to the market in recent sessions as well.