Natural gas futures have dropped below $3 for the first time in more than two years as forecasts of mild weather in the US and record production contribute to a growing stockpile surplus.

Gas is heading toward a 32 per cent annual drop, the biggest decline since 2006. Mild weather is forecast for mid-January after a brief cold spell, according to MDA Earth Sat Weather in Gaithersburg, Maryland.

An energy department report yesterday showed a smaller-than-average decline in inventories of the heating fuel as shale-gas production gained.

“Unless the weather changes dramatically, we are on track for the highest year- end storage ever,” said Phil Flynn, a senior market analyst at PFGBest Research in Chicago. – (Bloomberg)