Cold temps prop up U.S. natgas futures but milder weather looms

Fri Oct 25, 2013 9:14am EDT
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NEW YORK Oct 25 (Reuters) - U.S. natural gas futures, backed by cold weather for the next few days, edged higher for the third time this week on Friday, but a milder outlook for later next week and into early November helped limit the upside.

The front-month contract, which was down 2.9 percent so far this week, has been struggling, with investors torn between the near-term cold shot that has kicked up heating demand and the milder outlook into early November that should slow usage.

After a few more days of below-normal temperatures in the Midwest and East, readings were expected to trend milder and stay that way into early November.

Some traders had doubts about the potential upside for prices at least until more winter-like weather was sustained, noting inventories have climbed to comfortable levels and production was still flowing at or near a record-high pace.

At 8:55 a.m. EDT (1255 GMT), front-month November gas futures on the New York Mercantile Exchange, which expire on Tuesday, were up 2.5 cents at $3.654 per million British thermal units, after trading between $3.593 and $3.664.

The front contract slid on Thursday to a two-week low of $3.545 after a bearish weekly inventory report, then bounced back and settled up a penny.

Chart watchers noted the nearby contract has slipped into the $3.50s several times this week, only to be propped up by buying, marking that area as decent technical support.

MDA Weather Services expected chilly temperatures to dominate the eastern half of the nation for the next five days, with below-normal readings stretching from the northern Plains to the Southeast. But the forecaster noted the six-to-15-day outlook continued to trend warmer, particularly for the Midwest.

Many traders viewed Thursday's 87 billion cubic feet weekly inventory build as bearish, noting it came in above the Reuters poll estimate of 79 bcf and well above last year's increase of 64 bcf and the five-year average gain for that week of 67 bcf.   Continued...