Investing.com - U.S. natural gas futures fell sharply on Tuesday, as market participants looked ahead to fresh weekly information on U.S. gas inventories to gauge the strength of demand for the fuel.
Natural gas for delivery in December on the New York Mercantile Exchange sank 5.7 cents, or 2.58%, to trade at $2.153 per million British thermal units during U.S. morning hours. The more actively-traded January contract slumped 6.1 cents, or 2.58%, to $2.282 per million British thermal units.
A day earlier, prices surged as temperatures dipped below freezing in New York, boosting near-term heating demand.
Natural gas futures have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on early-winter heating demand.
The heating season from November through March is the peak demand period for U.S. gas consumption.
Prices of the fuel typically rise ahead of the winter as colder weather sparks heating demand. But a mild start to the winter heating season underlined concerns over a deepening supply glut.
The U.S. Energy Information Administration's next storage report due on Wednesday is expected to show a build of approximately 7 billion cubic feet for the week ending November 20.
That compares with a build of 15 billion cubic feet in the prior week, a withdrawal of 9 billion cubic feet in the same week last year, while the five-year average change for the week is a drawdown of 12 billion cubic feet.
The report comes out one day earlier than usual due to the Thanksgiving holiday in the U.S. on Thursday.
Total U.S. natural gas storage stood at a record-high of 4.000 trillion cubic feet, 10.1% higher than levels at this time a year ago and 5.2% above the five-year average for this time of year.
Last spring, supplies were 55% below the five-year average, indicating producers have more than made up for all of last winter’s unusually strong demand.
Inventories of the gas are typically built up during the warm summer months and then drawn down in the winter as cold temperatures increase demand for the fuel.
But market experts warned that stockpile buildups will probably continue for at least another week, two weeks beyond what is normal, due to tepid winter heating demand so far.
Natural gas prices are down almost 30% from highs hit in mid-August. Futures fell to multi-year lows near $2 per million British thermal units at the end of October, before rebounding slightly.
Elsewhere on the Nymex, crude oil for delivery in January rose $1.14, or 2.73%, to trade at $42.89 a barrel, while heating oil for December delivery jumped 1.64% to trade at $1.396 per gallon.