Natural gas futures fell on Monday to trade at their lowest level in almost three years, pressured by expectations that U.S. production may soon start to rise just as demand for the energy source slows in the so-called off season.
Oil futures, meanwhile, traded a bit higher, holding ground above $57 as turmoil in Yemen continue to raise concerns about crude supplies in the region.
May natural gas NGK15, -2.53% fell 7.6 cents, or 3%, to $2.455 per million British thermal units, ahead of the May contract expiration on Tuesday. June natural gas NGM15, -2.73% which is now the most-active contract, traded at $2.488, down 8 cents, or 3.1%. Prices, based on the most-active contracts, haven’t settled at levels this low since about June 2012, according to data from FactSet.
Phil Flynn, senior market analyst at Price Futures Group, pointed out that natural gas is in “shoulder season” — in between the heating-demand season of winter and the cooling-demand season of summer.
Baker Hughes BHI, +0.75% on Friday also reported an increase of eight in the number of U.S. rigs actively drilling for natural gas to total 225.
“We are clearly in a flat time of year — no real heating load or cooling load for May,” said Richard Gechter, Jr., principal and president of Richard W. Gechter Natural Gas Consulting.
The $2.50 level was “a psychological support number,” he said. There is nothing out there to move us up, but “I do not think we are going much lower.”
Meanwhile, West Texas Intermediate crude for June delivery CLM5, +0.09% added 29 cents, or 0.5%, to $57.44 a barrel on the New York Mercantile Exchange.
June Brent North Sea crude LCOM5, -0.26% weakened by 35 cents, a 0.5% loss, to $64.93 a barrel.
“As Saudi Arabia deploys ground troops to [Yemen’s] southern borders, markets remain jittery about the prospect of contagion in the Middle East,” said Matt Smith, a commodity analyst at Schneider Electric.
Elsewhere in the energy complex, May gasoline RBK5, +0.22% fell 1.2 cents, or 0.6%, to $1.996 gallon on Nymex. May heating oil HOK5, -0.11% fell a penny to $1.919 a gallon.