UPDATE 3-U.S. natgas futures end down 7 pct after bearish EIA report
* Futures tumble near 7 percent after bearish inventory report * Extended weather outlook trends milder * Coming Up: Baker Hughes rig data, CFTC trade data Friday By Joe Silha NEW YORK, May 2 (Reuters) - U.S. natural gas futures ended lower on Thursday for a third straight day, with a government report showing an unexpectedly-large weekly inventory build driving the front-month contract to its biggest one-day loss in nine months. Data from the U.S. Energy Information Administration showed total domestic gas inventories rose last week by 43 billion cubic feet to 1.777 trillion cubic feet. Most traders viewed the build as bearish, noting it came in well above the Reuters poll estimate of 28 bcf. But some noted it still fell well short of the 67-bcf five-year average increase for that week and continued to widen the deficit relative to that benchmark. "The first bearish storage report in several weeks sent the market sharply lower as the EIA reported a 43 bcf injection that took the market by surprise," said Mike Tran at CIBC Global World Markets in New York. Front-month gas futures on the New York Mercantile Exchange ended down 30.1 cents, or 7 percent, at $4.025 per million British thermal units after sliding late to a three-week low of $4.017. It was the biggest one-day decline for the front contract in since early August 2012. The contract, which just hit a 21-month high of $4.444 on Wednesday, lost 6 percent last week in its first weekly decline in 10 weeks. It is down about 3 percent so far this week. Cold late-winter weather, a chilly spring and above-average nuclear plant outages put a huge dent in record-high gas inventories at the start of the heating season and helped drive up gas prices this year. But despite lingering cold and another attempt to move higher this week, some said gas futures seemed to be struggling, noting prices have broken above the $4.40 level several times in the last two weeks only to be turned back by technical selling or profit-taking. "We're seeing more competition from coal which is slowing demand, and higher prices may be attracting more supply," a Massachusetts-based trader said. Despite a cold push this week in the Midwest that could drive Texas temperatures to record lows, Commodity Weather Group noted that the six- to 15-day outlook was trending warmer for both the Midwest and South. LARGER-THAN-EXPECTED INVENTORY BUILD This week's storage injection was only the third of the stock building season, but the first to exceed market expectations after an unusually cold spring extended heating demand. The weekly build narrowed the deficit relative to last year by 12 bcf to 795 bcf, or 31 percent below last year's record highs at that time. But it increased the shortfall versus the five-year average by 24 bcf, leaving stocks at 118 bcf, or 6 percent, below that benchmark. Early injection estimates for next week's report range from 43 to 84 bcf versus a 30-bcf build during the same week last year and a five-year average rise for that week of 69 bcf. PRODUCTION CLIMBS DESPITE FEWER RIGS The EIA reported on Tuesday that gross natural gas production in February climbed for the first time in three months. Output rose to about 1.27 bcf per day, or 1.8 percent, above the same month last year after dropping below year-ago levels in January for the first time since 2010. The report dimmed prospects that record high output would slow anytime soon despite the fact that the Baker Hughes gas drilling rig count has dropped to a 14-year low. The EIA recently estimated that marketed gas output in 2013 will hit a record high for the third straight year.
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