UPDATE 3-U.S. natgas futures end up, first gain in 6 sessions
* Mild Northeast, Midwest weather weighs on prices * Stocks climb above 5-year average, first time since March * Coming Up: Baker Hughes rig data, CFTC trade data Friday By Joe Silha NEW YORK, Aug 8 (Reuters) - U.S. natural gas futures ended higher for the first time in six sessions on Thursday, backed by technical buying and short-covering after the front contract slid to a 5-1/2-month low following a bearish weekly inventory report. Technical traders, noting the market was oversold and due for a bounce after its recent slide, said the higher close on Thursday following a prominent low could signal an upside reversal. But most chart watchers needed to see some follow-through buying in subsequent sessions to confirm a new trend. The U.S. Energy Information Administration reported that total domestic gas inventories rose last week by 96 billion cubic feet to 2.941 trillion cubic feet. Traders agreed the build was bearish, noting it was well above the five-year average increase for that week of 42 bcf, and prices sold off sharply. But the initial price slide was eventually tempered by news of the reclassification of 14 bcf of base gas to working gas in the West Region. "The market initially misread the (EIA) report, not seeing the reclassification. We were oversold technically and due for a short-covering move, but we're still seeing relatively mild forecasts ahead," said Patrick Saunders at Albans Energy, an independent consulting firm in Houston. Gas prices have been pressured for more than two weeks as Northeast and Midwest temperatures turned milder and allowed homeowners and businesses to turn down their air conditioners. It was the second straight week that the rise in inventory came in above the five-year average, and it left stocks above that benchmark for the first time since late March. The front contract, which lost 11.7 percent in the previous two weeks in its biggest two-week slide in 13 months, is still down about 1.5 percent so far this week. Front-month gas futures on the New York Mercantile Exchange ended up 5 cents, or 1.5 percent, at $3.297 per million British thermal units, after sinking to a contract low and 5-1/2-month spot low of $3.129 right after the EIA report. The recent price slide has left gas cheaper than coal produced in the eastern United States and could draw more demand from utilities opting to switch to the cleaner burning fuel to produce electricity. But with no broad-based heat wave on the horizon to kick up demand, many traders see more price pressure ahead, particularly with stocks now above normal and production flowing at or near a record peak. Forecaster MDA Weather Services said it expected seasonal to cool conditions to persist in the Midwest and East for most of the next two weeks. While gas stockpiles are about 9 percent below last year's record highs at that time, this week's inventory build wiped out the shortfall versus the five-year average, leaving stocks 20 bcf, or 0.7 percent, above that benchmark. More above-average builds are expected in coming weeks, with early estimates for next week's report ranging from 63 bcf to 75 bcf. Stocks rose by 20 bcf during the same year-ago week, while the five-year average increase for that week is 42 bcf. Traders were waiting for the next Baker Hughes drilling rig report on Friday. While the gas rig count remains not far above an 18-year low posted in June, it has risen in five of the last six weeks, stirring concerns that new pipelines and processing plants will allow producers to pump more supply into an already well-supplied market. The EIA on Tuesday trimmed its estimate for domestic gas production growth in 2013 but still expects output this year to be up 1 percent from 2012's record-high levels. It would be the third straight year of record production.
© Thomson Reuters 2016 All rights reserved.