UPDATE 3-US gas futures slip near 3 pct, weather outlook moderates
* Extended weather forecasts moderate, still near normal * Near record-high storage, production weigh on prices * Coming Up: EIA, Enerdata natgas storage data on Thursday (Updates prices to settlement, recasts) By Joe Silha and Eileen Houlihan NEW YORK, Dec 19 (Reuters) - U.S. natural gas futures slid nearly 3 percent on Wednesday, pressured after two days of gains by moderating weather outlooks that should curb heating demand for at least the remainder of the year. The front contract, which hit a 13-month high of $3.933 per million British thermal units in late November and a 2-1/2-month low of $3.261 on Friday, had gained about 3 percent in the prior two sessions. But much of that buying looked technical, according to traders, with prices bouncing from an oversold condition after seven straight losses and shorts covering ahead of the Christmas and New Year holidays. "Natural gas continues to be driven by the weather and the latest NOAA forecast issued yesterday afternoon once again switched to a much less supportive projection than the forecast from the weekend and the day before," noted Energy Management Institute's Dominick Chirichella. "The fundamentals and technicals are now suggesting that the market may be heading lower for the short term. As I have been discussing for weeks the direction of gas prices are primarily dependent on the actual and forecasted weather pattern now that we are in the heart of the winter heating season and currently those forecasts are now switching to a more bullish scenario," Chirichella added. Front-month January gas futures on the New York Mercantile Exchange slid 9.8 cents, or nearly 3 percent, to settle at $3.32 per mmBtu, after trading between $3.284 and $3.414. Other months ended lower as well, with the February contract losing 8.9 cents to finish at $3.366 and summer months losing about 7 cents each. Even with chilly weather ahead in some regions, few traders expected much upside with no extreme cold on the horizon and inventories hovering at record highs for this time of year. MDA Weather Services noted its six to 10-day and 11 to 15-day forecasts turned slightly warmer overnight, but the private forecaster still expects mostly normal temperatures to dominate the East, while below-seasonal readings will move into the West. Some traders noted that demand during the Christmas and New Year holiday weeks typically slows regardless of weather because many schools and businesses are closed. INVENTORIES LINGER NEAR RECORD HIGHS Energy Information Administration storage data last week showed gas inventories for the week ended Dec. 7 rose by 2 billion cubic feet to 3.806 trillion cubic feet. The rare December injection was viewed as bearish, with most traders expecting a slight decline. Gas inventories typically fall by more than 100 bcf during the first week of December. Inventories are still at a record high for this time of year, hovering at about 1 percent above year-ago levels and 8 percent above the five-year average. (Storage graphic: link.reuters.com/mup44s) Traders and analysts were waiting for the next EIA storage report on Thursday, with most expecting inventories to have fallen by 72 bcf last week, according to a Reuters poll released on Wednesday. A draw at the Reuters poll estimate would fall well short of both the 100 bcf pulled from inventory during the same week last year and the five-year average decline for that week of 144 bcf. Storage hit a record high of 3.929 tcf in early November, making this the fourth straight year in which inventories headed into the heating season at an all-time peak. DRILLING DECLINES, OUTPUT STILL NEAR RECORD Baker Hughes data last week showed the gas-directed rig count fell by one to 416, leaving the count 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 not shown any significant sign of slowing. The EIA last week 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. (Editing by Bob Burgdorfer and Phil Berlowitz)
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