November 21, 2013 / 3:18 PM / 4 years ago

UPDATE 3-US natgas futures hit 1-month high on storage draw, cold

* Prices shoot up after bullish EIA natgas storage draw

* Cold weather late this week, next week seen lifting demand

* Comfortable storage, record production limit upside

* Coming up: Baker Hughes rig data, CFTC trade data Friday

By Joe Silha

NEW YORK, Nov 21 (Reuters) - U.S. natural gas futures ended higher for a second straight day on Thursday, with the front-month contract driven to a one-month high by cold weather forecasts and a government report showing an unexpectedly large weekly draw from inventories.

The U.S. Energy Information Administration reported that total gas inventories fell last week by 45 billion cubic feet to 3.789 trillion cubic feet.

Many traders viewed the withdrawal, the first of the heating season, as bullish for prices, noting it came in well above the Reuters poll estimate of 33 bcf and also exceeded the highest estimate of 42 bcf in that poll.

Stocks fell 36 bcf during the same year-ago week, and the five-year average decline for that week was just 2 bcf.

“The withdrawal was more than the consensus expectation and at the top end of the range of market expectations. It was a supportive number that implies somewhat greater sensitivity to cold than generally appreciated, raising the baseline for future reports,” Citi Futures energy analyst Tim Evans said.

Front-month gas futures on the New York Mercantile Exchange ended up 2.8 cents, or 0.8 percent, at $3.702 per million British thermal units after climbing to a one-month high of $3.743 after the EIA report.

The nearby contract is up about 1.1 percent so far this week after gaining 4.2 percent in the previous two weeks.

Technical traders, noting the market still seemed stuck in a range between the $3.50s and $3.70s, said the front month needed to close above resistance in the low-$3.70s to set the stage for more upside.

But with stockpiles at comfortable levels and production flowing at a record-high pace, many traders expect only limited upside from here unless the cold weather is sustained.

MDA Weather Services expects strong cold to spread across the eastern two-thirds of the country over the next 10 days, with only a slight moderation in temperatures in its 11- to 15-day forecast.

The weekly storage draw left total gas stockpiles 2.3 percent below last year’s record highs for that time but about 0.4 percent above the five-year average for that week.

Early estimates for next week’s storage report range from a build of 7 bcf to a draw of 4 bcf. That would compare to a 2 bcf drop seen during the same year-ago week and a five-year average decline of 15 bcf for that week.

Traders were waiting for the next Baker Hughes drilling rig report on Friday. The gas rig count has risen in 13 of the last 21 weeks, stirring talk that new pipelines and processing plants may be encouraging producers to hook up more wells and pump more gas into an already well-supplied market.

The EIA expects U.S. gas production in 2013 to hit a record high for the third straight year, then climb again in 2014.

In the ICE cash market, prices for Friday delivery at Henry Hub , the benchmark supply point in Louisiana, edged up 5 cents to $3.68, but late differentials weakened to about 5 cents under NYMEX from a 2-cent discount on Wednesday.

Gas on the Transco pipeline at the New York citygate slipped 3 cents to $3.66 on the milder Friday outlook. Chicago was 7 cents higher at $3.76.

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