UPDATE 3-U.S. natgas futures end mixed, front slips on profit taking

Mon Apr 1, 2013 3:28pm EDT
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* U.S. weather expected to turn milder next week
    * Nuclear outages climb above last year and five-year

    By Joe Silha
    NEW YORK, April 1 (Reuters) - U.S. natural gas futures ended
mixed on Monday, with front months pressured by milder weather
forecasts for late this week and next week that should slow
demand, despite a brief cold shot expected for the next few
    Cold late-winter weather and above-average nuclear plant
outages have helped put a huge dent in inventories and driven
futures prices up nearly 30 percent since mid-February.
    But with milder spring temperatures just ahead, many traders
expect further upside in prices to be difficult, particularly
with production still flowing near a record peak.
    "The upcoming week is still expected to be much colder than
normal east of Colorado, but after that last blast of cold, it
looks like we're in for the start of the shoulder season," said
Gelber & Associates analyst Aaron Calder, noting the milder turn
in the weather likely prompted some longs to get out.
    Front-month gas futures on the New York Mercantile
Exchange ended down 0.9 cent at $4.015 per million British
thermal units after trading between $3.934 and $4.044. The front
contract hit a 19-month high of $4.121 on Thursday before
closing lower ahead of the Good Friday holiday.
    The nearby futures contract, which posted a sixth straight
weekly gain last week, finished March about 15 percent higher
and ended the first quarter up about 20 percent.
    Chart watchers noted near steady gains in open interest
backed much of the recent price rise, a bullish sign indicating
that new buying, not short covering, was fueling the upside.
    Futures-only open interest on Thursday hit a record high for
the tenth straight session, climbing to 1,437,134 contracts.
    Traders noted that gas prices at $4 could slow demand by
prompting utilities to use more coal to generate power and
increase supply by encouraging producers to turn on more wells.
    After a brief cold spell this week, forecaster MDA Weather
Services expects warmth to build eastward, with above-normal
temperatures from the Midwest to the East seen starting late in
the week and continuing at least through mid-April.
    Energy Information Administration data on Friday showed that
gross natural gas production in January fell nearly 1 percent
from December levels, the second straight monthly decline.
    Output also dropped below year-ago levels for the first time
in years, but it's still unclear if recent monthly declines were
due to well freeze-offs from the cold or producers curbing dry
gas flows because prices were not that attractive.
    Baker Hughes data Thursday showed the gas-directed
rig count fell last week for the fourth time in five weeks,
dropping by 29 to 389, its lowest since May 1999.

    EIA last month was still expecting marketed gas output in
2013 to hit a record high for the third straight year.
    U.S. Energy Information Administration data last week showed
total domestic gas inventories fell to 1.781 trillion cubic
feet, just 61 billion cubic feet, or 3.5 percent, above the
five-year average for that week. 

    Most traders expect stocks to fall below the five-year norm 
in Thursday's EIA report, with withdrawal estimates ranging from
45 to 97 bcf versus a 43-bcf build during the same week last
year and a five-year average increase for that week of 4 bcf.
    Stocks began winter at a record 3.929 tcf, but about 2.15
tcf of gas has been pulled from storage so far this heating
season, or 45 percent more than last year at this time.