UPDATE 3-Weather, storage back U.S. natural gas futures gains
NEW YORK Dec 26 (Reuters) - Front U.S. natural gas futures ended higher on Thursday after some early selling, backed by expectations for a bullish weekly inventory report on Friday and cold weather forecasts for the next two weeks that should stir more demand for heating.
Commodity Weather Group noted that computer models continued to project a colder-than-normal pattern over the next two weeks for the central, eastern and southern United States, with the strongest cold expected in the six- to 10-day period.
"The weather looks supportive enough to keep prices above $4 (per mmBtu), and people are expecting another supportive weekly inventory report, below last week's record high but well above the historical average," said Tom Saal, senior vice president at INTL FCStone in Miami.
Front-month January gas futures on the New York Mercantile Exchange ended up 1.7 cents at $4.433 per million British thermal units after trading between $4.377 and $4.465.
Chilly early winter weather has helped drive the front month up about 26 percent since Nov. 1, with the contract posting a 2-1/2 year high of $4.532 on Monday.
The steady move up in prices over the last seven weeks has broken some key technical resistance along the way and turned the chart picture bullish. But some traders said the market was overbought and due for some selling by longs taking profits.
Strong demand for heating this winter has burned up a lot of gas in inventory, with total storage withdrawals so far more than double what would normally be expected. That has prompted analysts to scale back end-winter inventory estimates.
This Friday's Energy Information Administration report is likely to show another above-average drawdown. A Reuters poll on Thursday showed traders and analysts expect to see a 177 billion cubic feet weekly inventory draw when the EIA releases its storage report on Friday at 10:30 a.m. EST. Continued...