UPDATE 3-U.S. natgas futures end down on milder long-term weather
* Front contract slides 4.2 pct this week on mild weather * Near-term cold in Midwest and East limits downside By Joe Silha NEW YORK, Feb 1 (Reuters) - Front U.S. natural gas futures ended lower on Friday in a seesaw session, pressured by a mild outlook for later next week that should slow heating demand despite strong gas use this week as cold weather settled into the Northeast and Midwest. "People are going back and forth about the weather. The market was up early on the cold in the Northeast, then sold off because we get another mild period after that," Steve Mosley at The SMC Report said. The nearby contract, which hit a 6-1/2-week high of $3.645 early last week, lost 4.2 percent this week. That followed a 3.4 percent slide last week as extended forecasts turned milder. Front-month gas futures on the New York Mercantile Exchange ended down 3.8 cents, or 1.1 percent, at $3.301 per million British thermal units after trading between $3.278 and $3.387. Despite attempts to rally this week off Tuesday's low in the $3.20 area, many traders remained skeptical of the upside, with inventories relatively high, production at or near a record peak and weather not cold enough to put a serious dent in supplies. Commodity Weather Group on Friday noted some colder shifts across the Midwest and East for the weekend and early next week, but the private forecaster said warmer trends in the six-to-10-day outlook continue to progress and focus mostly over the deep South and Midwest. Technical traders noted the front contract this week has been unable to rally above near resistance at the 40-day moving average in the $3.39-3.40 area. STORAGE DRAW FALLS SHORT OF EXPECTATIONS Data from the U.S. Energy Information Administration on Thursday showed that gas inventories fell last week by 194 billion cubic feet to 2.802 trillion cubic feet. Most traders viewed the decline as slightly bearish, noting it came in below the Reuters poll estimate of 206 bcf. The weekly draw widened the deficit relative to last year by 45 bcf to 202 bcf, or 7 percent below last year's record highs for that time. It also trimmed 16 bcf from the overhang versus the five-year average, but traders noted that storage was still relatively high at 304 bcf, or 12 percent, above that benchmark. Withdrawal estimates for next week's inventory report range from 127 bcf to 173 bcf. That would be well above the 94 bcf pulled from storage during the same week in 2012, but possibly below the five-year average decline for that week of 165 bcf. If drawdowns for the rest of winter match the five-year average, inventories will end March at 2.032 tcf, about 18 percent above normal, but 18 percent below last year, when stocks finished a mild heating season at a record-high 2.48 tcf. GAS RIG COUNT FALLS, OUTPUT STILL NEAR RECORD Baker Hughes data on Friday showed the gas-directed drilling rig count fell this week for the third time in four weeks, dropping by six to 428. While the gas rig count is hovering not far above the 13-1/2-year low of 413 hit about three months ago, production has shown no significant sign of slowing. EIA data on Thursday showed that November gross natural gas production in the lower 48 U.S. states rose to a record-high 73.88 bcf per day, the third straight monthly record. Output is running about 1.42 bcf per day, or 2 percent, above the same year-ago month. The agency estimates that marketed gas output in 2013 will hit a record high for the third straight year.
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