UPDATE 3-US natgas futures end up for 5th day, front hits 17-mth high
* Futures open interest hits second consecutive record high * Cold to continue into early April for Midwest, East * Coming up: Reuters natgas storage poll Wednesday By Joe Silha NEW YORK, March 19 (Reuters) - U.S. natural gas futures ended higher on Tuesday for a fifth day, with below normal temperatures this week and expectations for another supportive weekly inventory report on Thursday driving the front contract to a 17-month high. Cold late-winter weather has helped drive futures up more than 25 percent in the last month, turning the chart picture more supportive as front-month prices broke through some technical resistance levels along the way. "We've had some nice storage draws and the weather forecast still looks pretty cold, but this may be the last gasp before spring comes. I think the market is running out of steam," a Chicago-based trader said. Front-month gas futures on the New York Mercantile Exchange ended up 8.7 cents, or 2.2 percent, at $3.969 per million British thermal units after climbing late to $3.973, its highest level since October 2011. The nearby contract has gained nearly 9 percent in the last five sessions, the biggest five-day run up in two months. The recent move up was also accompanied by steady gains in futures open interest (OI), a bullish sign indicating that new buying, not short covering has fueled much of the upside. Futures-only OI hit a record high for a second straight day on Monday, climbing 3,840 contracts to 1,320,785. But some chart watchers said the contract was overbought and due for a pullback with winter winding down and the 14-day relative strength index climbing into the high-80s this week, its highest in years according to Reuters data. A cold winter has put a huge dent in inventories which could lift price expectations this year, but many fundamental traders see only limited upside from here with storage still comfortable and production flowing at or near an all-time peak. High gas prices above $4 could slow demand by prompting utilities to use more coal rather than gas to generate power and increase supply by encouraging producers to hook up more wells. Private forecaster Commodity Weather Group said it expected a generally cool or cold pattern to persist for the Midwest and East into early April. ANOTHER STRONG STORAGE DRAW EXPECTED Inventory withdrawals have beat expectations for four straight weeks and prompted analysts to sharply lower estimates for end-winter storage, with some expecting stocks to drop to 1.8 trillion cubic feet, or just 4 percent above average, before rebuilding begins again in April. A Reuters poll in mid-January showed most analysts had expected stocks to finish the heating season at about 2 tcf. Withdrawal estimates for Thursday's report range from 61 bcf to 74 bcf. Stocks were unchanged during the same week in 2012, while the five-year average drop for that week is 26 bcf. So far this winter, about 500 bcf, or 35 percent, more gas has been pulled from storage than last year at this time, but traders noted that stocks are still relatively high at 198 billion cubic feet, or 11 percent, above the five-year average. RIGS CLIMB, OUTPUT NOT SLOWING MUCH Baker Hughes data last week showed the gas-directed drilling rig count jumped sharply, climbing 24 to 431. The count posted a 14-year low the prior week. While the EIA last week lowered its growth forecast for 2013, it still expects marketed gas production to hit a record high for the third straight year.