UPDATE 3-U.S. natgas futures end up sharply on late buying spree

Fri May 17, 2013 4:16pm EDT
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* Futures end higher, nearly erasing Thursday's steep slide
    * Moderate weather not seen stirring much demand

    By Joe Silha
    NEW YORK, May 17 (Reuters) - U.S. natural gas futures ended
up sharply on Friday, backed by a late flood of buying ahead of
the weekend despite fairly neutral weather forecasts that are
not likely to stir up much demand.
    Gas prices sold off sharply on Thursday, sinking more than 3
percent after a bearish weekly inventory report.
    Chart traders said technical buying may have propped up
prices on Friday, noting futures seem to have found a bottom
after testing and holding technical support in the $3.90 per
mmBtu area several times over the last week or so.
    "The weather is still a little bearish, but we managed a net
gain for the week. It looks like we hit some buy stops when
prices broke the $4 mark," said Steve Mosley at The SMC Report.
    Front-month gas futures on the New York Mercantile
Exchange ended up 12.3 cents at $4.055 per million British
thermal units after trading between $3.915 and $4.096.
    For the week, the front contract gained 3.7 percent, its
first weekly rise in four weeks.
    Traders said buying was focused more up front, noting    
the June-January carry narrowed for the first time in three
days, slipping 1.3 cents to 39.7 cents. So far this year, that
spread has traded between 32.6 and 59.2 cents.
    But despite the uptick, many traders remain skeptical of the
firmer trend, at least until more heat arrives to force
homeowners and businesses to crank up air conditioners.
    In its six- to 10-day outlook, Commodity Weather Group said
it expected near seasonal temperatures for the Midwest, East and
South, with heat building in the Midwest after that period.
    Most traders viewed Thursday's 99 billion cubic feet weekly
inventory build as bearish, noting it came in above the Reuters
poll estimate of 95 bcf and well above the five-year average
increase for that week of 83 bcf.
    The U.S. Energy Information Administration report showed
that total domestic gas inventories climbed last week to 1.964
trillion cubic feet, about 26 percent below last year's record
highs at that time and 4 percent below the five-year average
storage level for that week. 

    Early injection estimates for next week's report range from
87 to 100 bcf versus a 75-bcf build during the same week last
year and a five-year average rise for that week of 90 bcf.    
    Baker Hughes data Friday showed the gas-directed rig
count climbed this week by four to 354 after posting an 18-year
low last week. 

    Despite a steep decline in dry gas drilling over the last
year and a half, production has not slowed much, if at all. EIA
still expects output in 2013 to post a record high for a third
straight year.