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Natural gas futures drop below USD4.00 on weather outlook

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Forexpros - Natural gas futures were down sharply on Monday, falling below the psychologically important USD4.00 level as moderating weather forecasts in the U.S., and concerns over rising production levels dragged down prices.

On the New York Mercantile Exchange, natural gas futures for September delivery traded at USD3.966 per million British thermal units during U.S. morning trade, plunging 2.42%.

It earlier fell as much as 2.7% to trade at USD3.951 per million British thermal units, the lowest price since August 11.

The Commodity Weather Group said on Friday that while it expected above-average temperatures across the Western U.S. states in the coming week, the firm's six-to-15 day forecast showed less intense heat was forecast in the U.S. Midwest and East during the period.

Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.

Predictions of below-average or above-average temperatures may prompt traders to buy or sell gas futures.

Meanwhile, concerns over rising production levels also weighed on prices. Industry research group Baker Hughes said Friday that the number of active rigs drilling for natural gas in the U.S. last week rose to 896 from 883, the fourth gain in five weeks and the highest since early March.

Natural gas traders closely watch the rig count to gauge future supply growth. The rig count has dropped sharply from a recent peak of 992 last August, but the current level of activity is still widely expected to lead to further production gains.

A drop to the 800-rig-level would be necessary to begin to balance the market, according to Baker Hughes.

Elsewhere on the Nymex, light sweet crude oil futures for delivery in October climbed 2% to trade at USD87.44 a barrel, while heating oil for September delivery rose 1.25% to trade at USD2.944 per gallon.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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