May 20, 2013 / 2:23 PM / 5 years ago

UPDATE 3-U.S. natgas futures end up for 2nd day, forecasts turn warmer

* Warmer trend this week lifts prospects for demand
    * Front-month futures end up for second day

    By Joe Silha
    NEW YORK, May 20 (Reuters) - U.S. natural gas futures ended
higher for a second straight session on Monday as warmer weather
stretching from Texas to the Northeast this week should boost
demand by forcing homeowners and businesses to crank up their
air conditioners.
    Prices have bounced roughly 4 percent in the last two
trading sessions as forecasts finally started to trend warmer.
    Commodity Weather Group said it expected the most humid air
of the season so far to move into the Midwest and East this
week, offering some uncomfortable heat index levels.
    While the forecaster sees heat lingering in the Midwest for
the next two weeks, mostly seasonal temperatures were expected
for the East, Gulf Coast and West in its six- to 10-day outlook.
    "Today's rise looks to be weather driven. Current weather
reports show a shift to warmer-than-normal weather, indicating
the beginning of summer cooling demand," Gelber & Associates
analyst Aaron Calder said in a report. 
    Front-month gas futures on the New York Mercantile
Exchange ended up 3.5 cents at $4.09 per million British thermal
units after trading between $4.063 and $4.159.
    But gains in deep deferred contracts far outpaced the rise
in the front months, with most 2018 contracts ending about 13
cents higher on news Friday that the U.S. Energy Department had
approved natural gas exports from Freeport LNG's Texas terminal.
    Traders noted the liquefaction plant will take several years
to build but could help tighten the supply-demand balance later
this decade.
    Chart traders noted the market seemed well supported in the
$3.90s after testing and holding that area several times last
week. But with supplies still comfortable, many traders remain
skeptical of the upside, at least until a broader-based heat
wave forces more air conditioning loads.
    Baker Hughes data Friday showed the gas-directed rig
count climbed last 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. The
Energy Information Administration still expects output in 2013
to post a record high for a third straight year. 
    Inventory builds have exceeded market expectations for three
straight weeks as mild May weather slowed overall demand.

    Early injection estimates for Thursday's EIA storage report
range from 87 billion to 99 billion cubic feet versus a 75-bcf
build during the same week last year and a five-year average
rise for that week of 90 bcf.

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