Natural gas futuresplunged 8 percent Thursday as supplies grew more than expected last week and as hot temperatures were forecast to moderate by the middle of August.
This was the biggest one-day percentage decline for a front-month natural gas contract since September 17, 2009.
September natural gas futures closed down over 20 cents at $2.92 per million BTUS, settling below $3 for the first time in two weeks. Natural gas futures had topped $3.17 earlier in the session and hit a 7-month high of $3.21 on Tuesday.
Natural gas suffered steep losses after the U.S. Energy Information Administration reported storage levels rose by 28 billion cubic feet last week. Platts survey of analysts had predicted storage levels would rise by 20 to 24 billion cubic feet on average. The weekly supply increase was still less than the injection to storage at this time last year, and was also below the five-year average.
CitiFutures analyst Tim Evans says the report suggests that "more of the incremental power demand is being met by burning coal" and he sees "some bearish implications for the weeks ahead as well."
The $1.1 billion UNG ETF, which follows natural gas futures, was also hard hit in the session. After climbing steadily, gaining nearly 30 percent in the past two months alone, the UNG ETF also plunged nearly 8 percent Thursday.
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