July 19, 2013 / 1:52 PM / in 4 years

UPDATE 3-U.S. natural gas futures end down, milder forecast weighs

* Northeast heat wave ends this weekend, pressures prices
    * Bullish storage expectations for next week limit downside

    By Joe Silha
    NEW YORK, July 19 (Reuters) - U.S. natural gas futures ended
lower on Friday, pressured by milder Northeast and Midwest
weather forecasts for next week that should finally slow demand
for air conditioning, which surged this week to near record
levels due to a heat wave.
    Profit taking ahead of the weekend may also have weighed on
the front contract following a 5 percent spike on Thursday after
a bullish weekly storage report.
    Front-month futures finished the week up 4 percent, their
third straight weekly gain and the biggest one-week increase in
eight weeks. But doubts remain about the upside, with
inventories comfortable, production still flowing at or near a
record high, and heat expected to break over the weekend.
    "The temperature forecasts for the next two weeks don't look
very supportive, but the market held up relatively well 
considering that," said Steve Mosley at The SMC Report.
    Front-month gas futures on the New York Mercantile
Exchange ended down 2.3 cents at $3.789 per million British
thermal units after trading between $3.761 and 3.827.
     The nearby contract, which hit a 3-1/2 month low of $3.526
in late June, posted a four-week high of $3.835 on Thursday. It
has gained 6.3 percent in the last three weeks.
    While Thursday's close above resistance in the high-$3.70s
turned the chart picture more supportive, many technical traders
were looking for a second strong close on Friday to confirm the
potential push higher. Next resistance was seen at about $4.
    After some record heat this week, particularly in the
Northeast, MDA Weather Services expects temperatures for most of
the eastern half of the country to moderate to near seasonal or
below seasonal levels during the six- to 15-day time frame.
    Data from the U.S. Energy Information Administration on
Thursday showed that total domestic gas inventories rose last
week by 58 billion cubic feet to 2.745 trillion cubic feet.
    Many traders and analysts viewed the build as supportive,
noting it came in well below the Reuters poll estimate of 64 bcf
and the five-year average increase for that week of 70 bcf.
    It was the first time in seven weeks that the weekly
injection fell below average, and it could do so again next
week, with early estimates ranging from 45 bcf to 60 bcf. Stocks
rose by 26 bcf during the same week last year, while the
five-year average increase for that week is 53 bcf.
    The weekly storage injection slightly increased the deficit
relative to the five-year average, but total stocks were still
only 34 bcf, or about 1 percent below that benchmark.
    Baker Hughes data on Friday showed the gas-directed 
rig count rose this week for a fourth straight week, climbing by
seven to 369. 
    While the count remains not far above the 18-year low of 349
posted late last month, the EIA still expects gas output in 2013
to hit a record high for a third straight year.

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