UPDATE 3-US natgas futures end down for 2nd day, milder temps weigh

Tue Apr 9, 2013 3:37pm EDT
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* Milder weather for the next week expected to slow gas use
    * Nuclear plant outages slip back below normal
    * Coming up: Reuters natural gas storage poll Wednesday

    By Joe Silha
    NEW YORK, April 9 (Reuters) - U.S. natural gas futures ended
lower on Tuesday for a second day, as investors took profits
amid mild weather forecasts for the eastern half of the nation,
but concerns about below-average inventory levels limited the
   Gas prices have been on a tear since mid-February, spiking
nearly 30 percent as cold weather and above-average nuclear
plant outages boosted demand for the fuel and helped whittle
down inventories, which had hit a record high in November.
    Last week, storage dropped below the five-year average for
the first time since September 2011, a supportive sign
particularly with another draw expected this week. 
    But some traders said the market, which rose in seven
previous weeks, may be ripe for a pullback, with milder weather
likely to slow demand and prices now at levels that make gas
less competitive against coal for power generation.
    "Some selling may be profit taking; the market had a good
run and people may be getting out to see how the shoulder
(spring) season unfolds, but there's also some bearish sentiment
starting to build," said Aaron Calder at Gelber & Associates.
    Front-month gas futures on the New York Mercantile
Exchange ended down 6.5 cents, or 1.6 percent, at $4.017 per
million British thermal units after trading between $4.004 and
    The front contract slid 2.6 percent in the last two
sessions. On Monday, it hit a 20-month high of $4.18 before
closing lower, raising concerns about a possible technical
reversal to the downside.
    Chart traders agreed that record growth in open interest
over the last seven weeks, up more than 25 percent as prices
mostly moved higher, indicates that speculative traders have
added a lot of new length, which could leave the market
vulnerable to a sharp sell-off when longs opt to take profits. 
    Forecaster Commodity Weather Group noted that the
six-to-10-day outlook turned warmer overnight for the East Coast
and parts of the Midwest, with temperature highs in lower
Mid-Atlantic states possibly breaking above 80 degrees
Fahrenheit again.    

    Inventory draws have exceeded market expectations in six of
the last seven weeks. 
    Withdrawal estimates for Thursday's EIA report range from 1
to 46 bcf, with most in the low- to mid-20s. Stocks rose 11 bcf
during the same week last year, while the five-year average
increase for that week is 15 bcf.
    That should be the season's last decline, with early
estimates for next week's report all looking for a modest build.
    U.S. Energy Information Administration data Thursday showed
total domestic gas inventories fell last week to 1.687 trillion
cubic feet, 32 percent below last year's record highs at that
time and 2 percent below the five-year average. 

    Stocks peaked last year in November at a record high 3.929
tcf but will end the heating season about 820 bcf below last
winter's record high finish of 2.48 tcf and 4 percent below
average for that time.
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell last week for the fifth time in six
weeks, dropping by 14 to a 14-year low of 375.

    Recent rig declines have raised expectations that output
might finally be poised to slow from 2012's record high.
    In its short-term energy outlook on Tuesday, EIA trimmed its
estimate for domestic gas production growth in 2013 but still
expects output to rise 0.3 percent from 2012's record levels.
The agency expects consumption this year to gain 1 percent.