Last week saw natural gas prices continue to trade near the lowest level in more than two years as forecasts for warmer-than-normal winter weather in the U.S. and concerns over elevated inventory levels dampened sentiment on the heating fuel.
On the New York Mercantile Exchange, natural gas futures for delivery in January settled at USD3.101 per million British thermal units by close of trade on Friday, dropping 0.6% over the week.
Prices fell to USD3.050 on Monday, December 19, the lowest since September 11, 2009, when futures last traded below the psychologically-important level of USD3.00.
Trading volumes were thin ahead of the Christmas holiday weekend, resulting in quiet trade. The NYMEX floor session closed early ahead of Monday’s Christmas holiday.
Natural gas prices tumbled nearly 2% on Friday as most weather forecasts continued to point to warmer-than-normal temperatures across most parts of the northern half of the U.S. and the eastern seaboard through early January, dampening hopes for a pick up in heating demand.
Meanwhile, short-term weather outlooks issued by the U.S. government on Thursday, the official start of winter, showed above-normal temperatures were expected to linger across the northern half of the U.S. through January 5.
Natural gas prices have closely tracked weather forecasts in recent weeks. Above-normal winter temperatures reduce the need for gas-fired electricity to heat homes, dampening demand for natural gas.
Natural gas futures edged modestly lower on Thursday after the U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. fell by 100 billion cubic feet in the preceding week, falling short of expectations for a decline of 103 billion cubic feet.
The drawdown was lower than the five-year average drop of 140 billion cubic feet. Supplies fell by 181 billion cubic feet in the same week a year earlier.
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 February delivery traded at USD99.86 a barrel by close of trade on Friday, rallying 6.16% on the week, while heating oil for January delivery climbed 3.8% over the week to settle at USD2.908 per gallon by close of trade Friday.
NYMEX floor trading was to remain closed December 26 because of the Christmas holiday. Trading volumes were expected to remain light this week, as market participants tend to move to the sidelines and take time off during the last week of December.