UPDATE 3-U.S. natgas futures end up despite bearish EIA data

Thu May 9, 2013 3:43pm EDT
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* Technical buying props up prices after early slide
    * Weather expected to moderate over the next two weeks
    * Coming Up: Baker Hughes rig data, CFTC trade data Friday

    By Joe Silha
    NEW YORK, May 9 (Reuters) - U.S. natural gas futures ended
higher on Thursday for a second straight day, reversing course
as technical buying pulled prices out of an early slide that
drove the front contract to a five-week low after data showed
swelling inventories.
    The U.S. Energy Information Administration reported that
total domestic gas inventories rose last week by 88 billion
cubic feet to 1.865 trillion cubic feet. 
    The weekly build was above the Reuters poll estimate of 83
bcf and well above the five-year average increase for that week
of 69 bcf.
    "The data suggests that even with colder than normal
temperatures over a large portion of the Midwest, there was only
minimal gas-related heating demand as demonstrated by the large
injection compared to last year and the five year average,"
Energy Management Institute's Dominick Chirichella said.
    Chirichella also noted that with forecasts becoming more
seasonable, the call on gas for heating or cooling will be
minimal for the next few weeks.
    Front-month gas futures on the New York Mercantile
Exchange ended up 0.5 cent at $3.983 per million British thermal
units after sliding to a five-week low of $3.883 right after the
EIA report.
    The front contract lost 2.7 percent last week, its second
straight weekly decline after nine consecutive weeks of gains.
It is still down 1.4 percent so far this week.
    Moderating temperatures have been making previously bullish
traders nervous. The milder weather follows a cold winter and
chilly spring that whittled down record high storage and drove
gas prices up more than 40 percent from mid-February lows,
peaking at a 21-month high of $4.444 last week.
    While chart traders said the market was oversold and due for
a bounce after sliding 9 percent in the last three weeks, they
said the upside was likely to be limited as milder temperatures
lead to more above-average weekly storage builds.
    There are still below-normal temperatures in the forecast,
particularly for Texas and the Southeast, but traders noted
below-seasonal readings at this time of year were not expected
to trigger much heating or cooling load.    
    Commodity Weather Group expects seasonal temperatures in the
Midwest, East and South during the 11- to 15-day time frame.
    Some traders expect gas prices to remain under pressure at
least until hotter weather arrives and forces homeowners and
businesses to crank up air conditioners.         
    This week's storage build was the fourth injection of the
stock building season. It exceeded market expectations for the
second straight week and pressured prices early.

    The weekly build narrowed the deficit relative to last year
by 58 bcf to 737 bcf, or 28 percent below last year's record
highs at that time. It also trimmed the shortfall versus the
five-year average by 19 bcf, leaving stocks at 99 bcf, or 5
percent, below that benchmark.
    Early injection estimates for next week's report range from
87 to 108 bcf versus a 56-bcf build during the same week last
year and a five-year average rise for that week of 83 bcf.
    Traders were waiting for the next Baker Hughes 
drilling rig report on Friday after last week's data showed the
gas-directed rig count slid to an 18-year low. 
    Despite the steep decline in dry gas drilling, production
has not slowed much, if at all, from 2012's record highs.

    The EIA on Tuesday raised its estimate for domestic natural
gas production in 2013, expecting output this year to be up
about 1 percent from last year. If realized, it would be the
third straight year of record production.