Natural gas futures prices dropped to two-year lows, nearly breaching a major psychological threshold, as a series of government reports illustrated dismal demand for the fuel in the face of surging supply.
Natural gas for February delivery lost 9.4 cents, or 3%, to settle at $3.027 cents per million British thermal units on the New York Mercantile Exchange, the contract’s lowest settlement since September 2009.
Futures hit an intraday low of $3.001/MMBtu, bringing the front-month price within striking distance of $3, a level that also was last reached in September 2009.
Gas futures have been in free-fall the last two months, as a milder-than-usual winter has curtailed demand for gas-fired heating for homes and offices across the country. Despite the weak demand, North American gas production continues to rise sharply, further weighing on prices.
“The weight on this market is just getting heavier and heavier,” said Jason Schenker, president of Prestige Economics, a consultancy based in Austin, Texas. “We will go below $3. Without a massive cold snap, it’s inevitable.”
Two reports from the Department of Energy weighed on futures prices. The first, released in the morning, showed natural gas inventories last week fell 81 billion cubic feet amid weak heating demand. The figure was smaller than the 89-bcf draw forecast by analysts surveyed by Dow Jones Newswires. It was also well below the five-year-average draw of 122 bcf and less than last year’s decline of 143 bcf for that week.