Natural gas futures reached a fresh six and a half year low Monday as ample gas supplies and weaker demand resulting from the economic downturn weighed on prices.
Natural gas for May delivery on the New York Mercantile Exchange recently traded 8.9 cents, or 2.70%, lower at $3.208 a million British thermal units. The contract fell as low as $3.155/MMBtu - the lowest since September 2002 - after opening floor trade at $3.188/MMBtu. Nymex options on May natural gas futures also expire on Monday.
Natural gas prices were under pressure from robust levels of natural gas storage and domestic production, which has remained strong despite the decline in the number of rigs drilling for natural gas.
"People keep looking for sings that production is starting to be shuttered. But we really haven't seen it yet," Gene McGillian, an analyst with Tradition Energy in Stamford, Conn., said.
Natural gas prices have have lost more than 75% of their since last July, when prices peaked at $13.694/MMBtu.
In response to that decline, natural gas producers have pulled back on drilling activity to stem the flow of natural gas into a market the oversupplied gas market.
The number of rigs drilling for natural gas in the U.S. has fallen by more than half from a peak last September of 1,606 rigs, according to oilfield services company Baker Hughes.
Natural gas storage levels have also swelled as demand for the fuel among industrial users of gas began tapering off.
Natural gas in U.S. storage stands at 1.741 trillion cubic feet - 35.8% higher than last year and 22.7% above the five-year average.