Natural gas was one of the worst performing sectors in 2011, and the start of 2012 does not look all too promising as exchange traded funds tracking commodity languish at all-time lows. On Thursday, the government announced a small drop in inventories due to unseasonably mild weather.
U.S. Natural Gas Fund (NYSEArca: UNG) was down 4% at last check Thursday.
Natural gas prices hit a 28-month low Thursday after the U.S. Department of Energy revealed a smaller-than-expected 76 billion cubic drop in inventories last week due to warmer weather conditions, reports Dan Strumpf for The Wall Street Journal.
The number was below the 135 bcf drop for the same week of last last year, and lower than the 106 billion cubic feet five-year average for the week. Analysts expected an average drop of 80 billion cubic feet.
“That just leaves us once again with record storage levels for this time of year,” Kyle Cooper, managing partner at IAF Energy Advisors, said in the WSJ article. “Storage remains very, very bearish.”
Natural gas futures were down more than 4% earlier in the day, trading below $3 per million British thermal units.
Shale production in the U.S. has ramped up natural gas supply. The government estimates that production increased 1.4% to a record 71.3 bcf per day in October.