UPDATE 3-U.S. natgas futures end lower for 5th straight loss

Wed Dec 12, 2012 3:13pm EST

* Extended forecasts for mild weather pressure prices
    * Front futures down nearly 9 pct in last five sessions
    * Near record-high storage, production also weigh
    * Coming Up: EIA, Enerdata natgas storage data on Thursday


    By Joe Silha
    NEW YORK, Dec 12 (Reuters) - U.S. natural gas futures closed
lower for a fifth straight session on Wednesday as comfortable
supplies and forecasts for relatively mild weather through next
week drove the front-month contract to another six-week low.
    While technical traders said the market was oversold and due
for a bounce after its recent slide, particularly ahead of a
weekly inventory report on Thursday, few expected much upside
with gas fundamentals still favoring the bears.
    "Warmer than normal temperatures are continuing to send more
and more bulls to the sidelines. None of the normal price
drivers for natural gas are overly supportive for higher
prices," Energy Management Institute's Dominick Chirichella said
in a report.
    With no extreme cold on the horizon, most traders agreed gas
prices were likely to remain on the defensive, with inventories
still near record highs for this time of year and production
flowing at or near an all-time peak.
    Traders and analysts were waiting for the next U.S. Energy
Information Administration storage report on Thursday, with most
expecting inventories to have fallen by just 4 billion cubic
feet last week, according to a Reuters poll. 
    A draw at the Reuters poll estimate would be viewed as
bearish, coming in well below last year's drop of 79 bcf and the
five-year average decline for that week of 113 bcf.
    Front-month gas futures on the New York Mercantile
Exchange ended down 3 cents at $3.382 per million British
thermal units after sinking early to $3.366, its lowest since
late October. 
    The front contract, which hit a 13-month high of $3.933
about three weeks ago, has lost nearly 9 percent in the last
five sessions, its second biggest five-day slide in 12 weeks.
    AccuWeather.com expects temperatures in the Northeast and
Midwest, key gas consuming regions, to average above normal for
the next week or so, then cool to below normal just before the
Christmas holiday as daytime highs drop into the high 20s and
low 30s Fahrenheit.
    
    BEARISH INVENTORY REPORTS AHEAD
    EIA storage data last week showed gas inventories for the
week ended Nov. 30 fell 73 bcf to 3.804 trillion cubic feet. 
    While storage last week fell below year-ago levels for the
first time in 13 months, traders noted that total stocks were
still 168 bcf, or 5 percent, above the five-year average, a
comfortable cushion to meet any spikes in winter demand or
unexpected disruptions in supply. 

    A huge inventory surplus to last year, which peaked in April
at nearly 900 bcf, has been wiped out, but storage is expected
to climb back above year-ago in Thursday's EIA report.
    Stocks hit a record high of 3.929 tcf in early November,
making this the fourth straight year in which gas inventories
have headed into the heating season at a record peak.
    
    RIGS DECLINE, PRODUCTION STILL NEAR RECORD
    Baker Hughes Inc data on Friday showed the
gas-directed rig count fell by seven last week to 417, just
above the 13-1/2 year low of 413 posted four weeks ago.
 

    Drilling for natural gas has mostly been in decline for more
than a year, with gas rigs down 55 percent since peaking in 2011
at 936 in October. But so far production has shown no
significant sign of slowing.
    In its short-term energy outlook on Tuesday, EIA said it
expects gas production in 2013 to rise to a record high for a
third straight year, while consumption was expected to drop
slightly from 2012 levels.
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