US natural gas futures settled at their lowest since February 1999 on Thursday on forecasts that continue to call for much warmer-than-normal weather through the middle of March that will keep heating demand light. Front-month gas futures on the New York Mercantile Exchange closed down 3.9 cents, or down 2.32 percent, at $1.639 per million British thermal units, putting the contract into technically oversold territory.
Futures have mostly been on a downward trend for months. They are down 30 percent since the start of 2016. "Aside from bouts of short covering there is currently no fundamental support to push gas prices higher," Dominick Chirichella, senior partner at the Energy Management Institute in New York, said in a note.
Even a bigger-than-expected storage draw had little effect on the falling prices. The US Energy Information Administration said utilities pulled 48 billion cubic feet of gas from inventories during the week ended February 26, topping analysts' 41-bcf estimate in a Reuters poll. That however was still the smallest draw seen since December and compares with last year's 227 bcf draw and the five-year average draw of 137 bcf.
Over the next four weeks, Thomson Reuters Analytics expects utilities to pull just 104 bcf from storage, leaving total stockpiles of over 2.440 trillion cubic feet at the end of March. That would top the current record high set in 2012 of 2.369 tcf at the end of the withdrawal season. The contango in the NYMEX market continued to widen on Thursday with the premiums of the May 2016 future over April 2016 and April 2017 over April 2016 at their highest since 2008.
Short-dated contracts were declining on the forecasts for warmer weather, weak winter heating demand, near-record production and record-high storage levels. Longer-dated contracts, meanwhile, were rising on expectations for growing power and industrial demand and higher exports over the next few years, especially from liquefied natural gas terminals being built.