UPDATE 3-U.S. natural gas futures end down, 1st loss in 4 sessions
* Front month hits new high, then slips on profit taking * Chilly weather seen continuing through April * Weekend nuclear plant outages climb back above average By Joe Silha NEW YORK, April 15 (Reuters) - U.S. natural gas futures, shrugging off chilly forecasts for the next two weeks, ended lower on Monday for the first time in four sessions on profit taking after the front contract in overnight trade posted its highest mark in more than 20 months. With prices at levels that make gas less competitive with coal for power generation, some traders have been bracing for a pullback, one that could pick up momentum as new speculative longs, now at a record high, opt to take profits ahead of milder temperatures next month that should slow demand. "The market pulled back a little, maybe with the overall weakness in energy, but I don't see much of a break in the (chilly) weather yet, and prices will probably bounce back again," a New England-based broker said. Front-month gas futures on the New York Mercantile Exchange ended down 8.5 cents, or 2 percent, at $4.137 per million British thermal units after climbing overnight to $4.29, their highest level since late July 2011. The front contract has gained ground in eight previous weeks, climbing nearly 35 percent since mid-February as cold late-winter weather and above-average nuclear plant outages whittled down record high inventories at the start of the heating season and tightened overall supplies. Traders said the sharp spike in the March-April backwardation, which at 42 cents on Friday was nearly double early April levels, reflected expectations that inventories would be a lot tighter next heating season after cold late-winter weather this year put a huge dent in stored supplies. Some traders remain skeptical of the upside, noting domestic output was still flowing at robust levels and prices were reaching levels that could tempt producers to increase supply. MDA Weather Services noted that the six-to-10-day outlook had turned colder, with much below normal temperatures expected for the Midwest and South, while mid-Atlantic states will see below normal readings. The West will be warm during the period. INJECTION SEASON SET FOR SLOW START U.S. Energy Information Administration data last week showed that total domestic gas inventories had fallen to 1.673 trillion cubic feet, 32 percent below last year's record highs for that time and 4 percent below average. The 14 billion cubic feet weekly inventory draw in the report should be the last of the heating season, but persistent cold in April, particularly in the Midwest, has traders and analysts expecting only modest builds this month. Early injection estimates for Thursday's EIA report range from 22 to 55 bcf versus a 21-bcf build during the same week last year and a five-year average rise for that week of 39 bcf. Winter withdrawals this year totaled about 2.25 tcf, roughly 770 bcf or 52 percent more than last year and 15 percent more than the normal draw during the heating season. RIG COUNT CLIMBS, WHEN WILL OUTPUT SLOW? Baker Hughes data on Friday showed the gas-directed rig count rose last week by two to 377, raising concerns that higher gas prices may be stirring more dry gas drilling. Drilling for natural gas has mostly been in decline for the last 18 months. The count is down about 60 percent since peaking in 2011 at 936 and is hovering just above the 14-year low posted two weeks ago, but so far production has not slowed much from the record high hit last year. EIA recently trimmed its estimate for domestic gas production growth in 2013 but still expects output to rise 0.3 percent from 2012's record levels.
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