On the New York Mercantile Exchange, natural gas futures for delivery in May settled at USD1.927 per million British thermal units by close of trade on Friday.
On the week, prices tumbled 3%, the fifth consecutive weekly loss. Earlier in the day, prices fell to USD1.902 per million British thermal units, the lowest since September 26, 2001.
Prices have been hitting a string of fresh 10-year lows below the key USD2.00-level over the past two weeks, as market sentiment has been dominated by ongoing concerns over waning demand and elevated U.S. storage and production levels.
The U.S. Energy Information Administration said in its weekly report Thursday that natural gas storage in the U.S. rose by 25 billion cubic feet last week, broadly in line with expectations, after increasing by 8 billion cubic feet in the preceding week.
Inventories rose by 42 billion cubic feet in the same week a year earlier, while the five-year average change for the week is an increase of 26 billion cubic feet, according to U.S. Energy Department data.
Total U.S. natural gas storage stood at 2.512 trillion cubic feet as of last week, a record high for this time of year and almost 58% higher than the five-year average for this time of year.
But prices recovered on Friday, moving off the ten-year low on the back of technical buying as traders closed out bets on lower prices after futures moved into oversold territory, a move known as covering a short position.
Despite Friday’s rare upward move, market participants expect the near-term downtrend in prices to continue, with some traders expecting prices to fall to USD1.850 in the short-term and eventually testing the all-time low of USD1.020 hit in 1992 in the long-term.
Natural gas prices have plunged almost 26% since the beginning of March and are down nearly 36% since the start of 2012.
Indications that demand for the fuel will remain weak in the near-term further weighed on market sentiment.
In a three-month forecast for May through July, the National Oceanic and Atmospheric Administration said Thursday that above-normal temperatures are expected to stretch from the southwest across to much of the East Coast.
The U.S. gas market is entering the so-called shoulder season. Gas use typically hits a seasonal low with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning.
Further dampening sentiment on the fuel, researchers at Colorado State University said in a report last week that only four hurricanes are expected during this year’s storm season.
In total, the storm season that runs from June 1 to November 30 will produce 10 named systems, compared with 19 last year.
Energy traders track tropical weather in the event it disrupts production in the Gulf of Mexico. Production in federal waters in the Gulf accounts for about 10% of natural-gas output, and prices typically spike when storms threaten production.
Early injection estimates for next Thursday’s storage data range from 35 billion cubic feet to 75 billion cubic feet, compared to last year's build of 35 billion cubic feet. The five-year average change for the week is an increase of 47 billion cubic feet.
Current inventories are at levels they didn't reach last year until the end of June. Concerns are growing over whether enough capacity exists to store the fuel.
If weekly stock builds through October match the five-year average, inventories would top out at 4.594 trillion cubic feet, 12% over peak capacity estimates of about 4.1 trillion cubic feet.
Meanwhile, daily trading volume of natural-gas futures increased 31%, to 400,806 contracts during the first quarter from the same quarter a year ago, according to the CME Group, operator of the NYMEX.
According to market participants, popular trades include trying to call a bottom on declining prices while others focus on volatile price movements in an attempt to exploit price differences for a quick profit.
Elsewhere in the energy complex, light sweet crude oil futures for June delivery traded at USD104.08 a barrel by close of trade on Friday, rising 1.19% on the week, while heating oil for May delivery dipped 0.56% over the week to settle at USD3.142 per gallon by close of trade Friday.