UPDATE 3-Mild forecasts pressure U.S. natgas futures for 3rd week

Fri May 10, 2013 3:33pm EDT
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* Front month ends down for third straight week
    * Weather expected to moderate, slow demand in next 2 weeks

    By Joe Silha
    NEW YORK, May 10 (Reuters) - U.S. natural gas futures ended
lower on Friday as bearish weekly inventory data and moderating
weather forecasts, that should slow gas usage, drove the
front-month contract to its third straight weekly decline.
    Gas prices have been on the defensive for much of the last
three weeks, sliding more than 11 percent during that period, as
milder spring weather curbed space heating needs.
    The milder turn in the weather followed a cold winter and
chilly spring that whittled down record high storage levels and
drove gas prices up more than 40 percent from mid-February lows.
    But expectations now are that the milder trend may lead to
above-average weekly inventory builds and possibly leave a high
level of stocks heading into the next heating season.
    "The market didn't come unglued after Thursday's big storage
build, but it did close near the lows today, which could point
to more downside," said Steve Mosley at The SMC Report, noting
bearish weather for the next two weeks should favor more big
inventory builds.
    Front-month gas futures on the New York Mercantile
Exchange ended down 7.3 cents, or 1.8 percent, at $3.91 per
million British thermal units after trading between $3.907 and
    The front contract, which hit a 21-month high of $4.444 last
week and a five-week low of $3.883 this week, lost 3.2 percent
in the last five sessions, its third straight weekly decline
following nine consecutive weeks of gains. 
    Some chart traders, noting the front month posted a double
top above $4.40 in late April and early May, expect any upside
to be limited, at least until hotter weather arrives and forces
homeowners and businesses to crank up air conditioners.
    Commodity Weather Group noted the latest six- to 10-day and
11- to 15-day forecasts turned a bit warmer overall for the
Midwest and East, but the forecaster said it did not expect
temperature anomalies to generate much load.
    Data from the U.S. Energy Information Administration on
Thursday showed 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, and initially pressured prices. 
    The gain, which was the fourth of the stock building season
and exceeded market expectations for the second straight week,
trimmed the deficit 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.
    Baker Hughes data Friday showed the gas-directed rig
count fell this week by four to 350, its lowest since June 1995.

    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.