NEW YORK (Dow Jones) --Natural gas futures sank Thursday ahead of a weekly report expected to show an unusually large build in U.S. inventories, amid weak demand.
Natural gas for May delivery recently fell 3.8 cents, or 1.6%, to $2.244 a million British thermal units on the New York Mercantile Exchange.
The even-cheaper April contract expired Wednesday at a fresh 10-year low of $2.191 million British thermal units.
The Energy Information Administration's weekly survey is expected to show natural gas inventories last week rose 46 billion cubic feet, sharply topping the year-ago level and the five-year average for the week.
If the survey is correct, the data would put inventories at 2.426 trillion cubic feet, 50% higher than a year ago and a record high for the week. Inventories would be 47% above the five-year average for this time of year.
Last year this week, inventories rose just 7 billion cubic feet.
"We feel that odds heavily favor additional selling following release of today's weekly EIA storage report," according to Jim Ritterbusch, head of the trading advisory firm Ritterbusch and Associates.
The sizeable build is expected amid weak demand for natural gas in the face of near-record production. The unusually mild winter and early spring has clobbered demand for natural gas used to heat homes and offices, leaving natural gas stores brimming and prices at their lowest levels in 10 years.
The unusually large spring inventory builds has raised fears among market observers that stockpiles could reach capacity when inventories peak in the autumn. Such an event would send prices sliding even further, as buyers disappear amid an absence of locations to store gas, according to analysts.
Front-month natural gas prices have already fallen 25% this year.
The mild temperatures are likely to persist for the foreseeable future, according to weather forecasts, suggesting that heating demand is unlikely to see a significant return this season. Commodity Weather Group said it sees above-average temperatures on the gas-consuming East Coast through the next two weeks.
Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.02/MMBtu, according to IntercontinentalExchange, compared with Wednesday's average of $2.0482/MMBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $2.19/MMBtu, down from $2.2056/MMBtu.
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