NEW YORK: US natural gas futures slid about 2% to a 3-1/2-year low on Tuesday on forecasts for mild weather and low heating demand through early March, near record output and a drop in global gas prices to their lowest in months.

Traders also noted US gas inventories remained much above normal levels for this time of year, while the amount of gas flowing to liquefied natural gas (LNG) export plants remained low due to ongoing work at Freeport LNG’s plant in Texas.

Analysts forecast gas stockpiles were currently around 22% above-normal levels for this time of year.

Gas prices were down about 37% so far in 2024, prompting some producers to plan to reduce drilling this year. Still, analysts said gas output could increase because oil prices are high enough to encourage producers to drill in shale basins like the Permian in Texas and New Mexico and the Bakken in North Dakota, where oil wells produce a lot of associated gas.

Front-month gas futures for March delivery on the New York Mercantile Exchange fell 3.3 cents, or 2.1%, to settle at $1.576 per million British thermal units (mmBtu), their lowest close since June 2020, which was the height of COVID-19 demand destruction.

With the front-month down 41% over the past three weeks, speculators boosted their net short futures and options positions on the New York Mercantile and Intercontinental Exchanges to the most since March 2020.