Investing.com - Natural gas futures bounced higher during U.S. afternoon trade Tuesday, as bargain hunters purchased the heating fuel despite concerns over elevated U.S. storage levels amid indications major North American natural gas producers were cutting back on production.
On the New York Mercantile Exchange, natural gas futures for delivery in June traded at USD2.373 per million British thermal units during U.S. afternoon trade, gaining 1.71%.
It earlier fell by as much as 1.8% to trade at a session low of USD2.287 per million British thermal units.
Sentiment on the heating fuel has improved in recent weeks after hitting a string of fresh 10-year lows. Prices are up almost 21% since hitting a decade-low of USD1.902 on April 19, amid indications major North American natural gas producers were cutting back on production in response to lower prices.
Speculation that utility providers in the U.S. were switching from pricier coal to cheaper natural gas provided further support over recent sessions. U.S. power companies used 34% more gas in February than a year earlier, Energy Department data showed.
However, prices remain vulnerable to a downside correction in the near-term as traders remain concerned over elevated U.S. storage levels.
The U.S. Energy Information Administration said last week that natural gas storage in the U.S. rose by 28 billion cubic feet to 2.756 trillion cubic feet, up 48% from year ago levels and 50% higher than the five-year average.
Current inventories are at levels they did not reach until July of last year.
If weekly stock builds through October match the five-year average, inventories would top out at 4.532 trillion cubic feet, 9% over peak capacity estimates of about 4.1 trillion cubic feet.
Early injection estimates for this week’s storage data range from 25 billion cubic feet to 65 billion cubic feet, compared to last year's build of 71 billion cubic feet. The five-year average change for the week is an increase of 84 billion cubic feet.
Meanwhile, technical traders noted that upward price movement seemed stalled, with the market unable to break above the six-week high of USD2.385 hit early last week despite several attempts.
Elsewhere on the NYMEX, light sweet crude oil futures for delivery in June tumbled 1.33% to trade at USD96.64 a barrel.