View: Natural gas futures slump 2% in early trade; hover above 5-week lo...

Forexpros - Natural gas futures were down sharply during U.S. morning hours on Monday, trading just above the previous session’s five-week low as last week’s bearish supply report renewed concerns about the massive domestic supply glut.

Market participants largely shrugged off forecasts for warmer weather across key parts of the U.S. through mid-June.

On the New York Mercantile Exchange, natural gas futures for delivery in July traded at USD2.241 per million British thermal units during U.S. morning trade, tumbling 2.5%.       

It earlier fell by as much as 2.6% to trade at a session low of USD2.240 per million British thermal units. Prices touched USD2.232 on Friday, the lowest since April 30.

Concerns over elevated U.S. storage level re-emerged after the U.S. Energy Information Administration said last week that natural gas storage in the U.S. rose by 62 billion cubic feet 2.877 trillion cubic feet last week, the highest ever for this time of year and 33% above the five-year average.

The larger-than-expected increase raised worries about where excess gas will be stored later this year.

The storage surplus to last year will have to be cut by at least another 465 billion cubic feet to avoid breaching the government's 4.1-trillion cubic feet estimate of capacity.

Barclays Capital said Friday that gas prices will need to stay "in the low USD2.00 per million British thermal units" to persuade utilities to keep burning natural gas and avoid filling up available storage capacity later this year.

Early injection estimates for this week’s storage data range from 64 billion cubic feet to 80 billion cubic feet, compared to last year's build of 72 billion cubic feet. The five-year average change for the week is an increase of 88 billion cubic feet

Prices have been on the decline since touching a three-month high of USD2.820 on May 21. Despite the recent run of losses, natural gas prices are still up 18% since touching a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production.

Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent weeks. However, market players noted that sustained prices back above USD2.50 and toward the USD3.00-level likely would inspire some switching back to coal.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in July shed 0.4% to trade at USD83.73 a barrel, while heating oil for July delivery dipped 0.25% to trade at USD2.665 per gallon.