UPDATE 3-Weather drives US natgas futures to 7th straight loss
* Mild forecasts for next week again pressure prices * Near record-high storage, production also weigh * Front futures down more than 10 pct in last 7 sessions (Releads, adds trader quote, updates prices) By Joe Silha NEW YORK, Dec 14 (Reuters) - U.S. natural gas futures ended lower on Friday for a seventh straight day, with record high supplies and moderate Northeast and Midwest weather forecasts again driving the front-month contract to a 2-1/2-month low. Technical traders agreed the market was due for a bounce after its recent stumble, particularly with the 14-day relative strength index, an indicator of market momentum, sliding into very oversold territory in the mid 20s late this week. But few expected much upside with no extreme cold on the horizon, inventories back at record highs for this time of year, and production flowing at or near an all-time peak. "People are hesitant to go long (buy) here. We're looking at the weather forecasts, and they still look pretty mild," said Steve Mosley at The SMC Report. Front-month gas futures on the New York Mercantile Exchange ended down 3.3 cents, or 1 percent, at $3.314 per million British thermal units, after sinking earlier to $3.261, the lowest level since late September. The front contract, which hit a 13-month high of $3.933 three weeks ago, has lost more than 10 percent in the previous six sessions, the biggest seven-day slide in four months. 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 during the Christmas week as daytime highs drop into the high 20s and low 30s Fahrenheit. But despite the cooler extended outlook, which could boost heating needs, traders said demand during the Christmas and New Year holiday weeks typically slows regardless of weather because many schools and businesses are closed. RIGS DECLINE for 3RD WEEK, OUTPUT STILL NEAR RECORD Baker Hughes data on Friday showed the gas-directed rig count fell by one this week to 416, just above the 13-1/2-year low of 413 posted five weeks ago. (Rig graphic: r.reuters.com/dyb62s) Drilling for natural gas has mostly been in decline for more than a year, with gas rigs down 56 percent since peaking in 2011 at 936 in October. But so far production has shown no significant sign of slowing. The U.S. Energy Information Administration on Tuesday said it expected gas output in 2013 to rise to a record high of 69.59 billion cubic feet per day, the third straight annual record. INVENTORIES HOVER NEAR RECORD HIGHS EIA data on Thursday showed total domestic gas inventories rose last week by 2 bcf to 3.806 trillion cubic feet. Traders viewed the weekly injection as bearish, noting that gas inventories typically fall by more than 100 bcf during the first week of December. The Reuters poll estimate was for a decline of 4 bcf, with only five of 26 participants expecting a small build. The build drove inventories back up to 48 bcf, or 1 percent, above year-ago levels, from a slight deficit the week before. It also added 115 bcf to the surplus relative to the five-year average, increasing that total to 283 bcf, or 8 percent. (Storage graphic: link.reuters.com/mup44s ) Storage hit a record high of 3.929 tcf five weeks ago and is still at record highs for this time of year. This is the fourth straight year in which inventories headed into the heating season at an all-time peak. The storage surplus is expected to widen further in next week's report, with early withdrawal estimates ranging from 53 bcf to 81 bcf. That would be well short of the 100 bcf pulled from inventory during the same week last year, while the five-year average decline for that week is 144 bcf. (Additional reporting by Eileen Houlihan; editing by John Wallace and Marguerita Choy)
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