UPDATE 3-US May natgas futures expire lower, front posts weekly loss

Fri Apr 26, 2013 3:57pm EDT

* Weather outlooks turn cooler for early May
    * Nuclear power plant outages remain below average


    By Joe Silha
    NEW YORK, April 26 (Reuters) - U.S. natural gas futures
mostly ended higher on Friday, but  moderating weather forecasts
and tapering spring demand helped drive the front-month May
contract to a lower expiration.
    Cold late-winter weather, a chilly spring and above-average
nuclear plant outages put a huge dent in record gas inventories
and helped drive up price estimates this year. 
    Despite Thursday's bullish inventory report and expectations
that another light build next week will drive stocks further
below the five-year average, technical traders said the steep
uptrend since mid-February that firmed prices some 40 percent
might be ready for a pause, at least a temporary one.
    "We were due for a pullback. Supply and demand should start
loosening up when the weather turns milder, but I don't think
the rally is over," said Steve Mosley at THE SMC Report in
Arkansas.
    Front-month May gas futures on the New York
Mercantile Exchange expired down 1.5 cents at $4.152 per million
British thermal units after trading between $4.062 and $4.196.
The contract hit a 21-month high of $4.429 late last week.
    It was the fourth decline in five sessions for the front
contract, which posted its first weekly decline in 10 weeks.    
The 5.8 percent slide this week broke trendline, moving average
and Fibonacci support along the way.
    But chart traders were not calling an end to the recent bull
market, particularly with the near month settling on Friday well
above the session low and back above the 20-day moving average
at $4.135, a support point broken earlier in the day.
    Next support was pegged in the $3.93 area, which is a 38.2
Fibonacci measurement and the front-month high from 2012. A
close below that level could herald the end of the bull run, at
least until hotter weather kicks up air-conditioning loads.
    Commodity Weather Group expects temperatures in the eastern
half of the nation to cool to below normal late next week, with
some heating demand in the Midwest partly offset by diminished
cooling loads across the South in the six-to-15-day time frame.

    ANOTHER LIGHT INVENTORY BUILD 
    Data from the U.S. Energy Information Administration on
Thursday showed total domestic gas inventories rose last week by
30 billion cubic feet to 1.734 trillion cubic feet. That was
below the Reuters poll estimate of 32 bcf and well below the
five-year average increase of 50 bcf for that week.
    This week's storage injection was only the second of the
stock-building season, which started about three weeks later
than expected due to an unusually cold spring.
    The weekly build widened the deficit relative to last year
by 13 bcf to 807 bcf, or 32 percent below last year's record
highs at that time. It also increased the shortfall versus the
five-year average by 20 bcf, leaving stocks at 94 bcf, or 5
percent, below that benchmark.

    Early injection estimates for next week's report range from
25 to 40 bcf versus a 31-bcf build a year earlier and a
five-year average rise for that week of 67 bcf.
    
    OUTPUT NOT SLOWING MUCH YET
    Baker Hughes data Friday showed the gas-directed rig
count fell this week by 13 to a 14-year low of 366. The count
had risen slightly in two previous weeks, but this week's drop
likely eased concerns that the recent surge in gas prices would
tempt producers to bring on more supply. 

    Drilling for natural gas has mostly been in decline for the
past 18 months. The count is down about 61 percent since peaking
in 2011 at 936, but production so far has not slowed much, if at
all, from the record high hit last year.
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