UPDATE 3-U.S. natgas futures end down on pre-holiday profit-taking

Fri May 24, 2013 3:25pm EDT

* Cool near-term forecasts, holiday pressure prices
    * Warmer extended weather outlook limits downside


    By Joe Silha
    NEW YORK, May 24 (Reuters) - U.S. natural gas futures ended
slightly lower on Friday in light profit-taking ahead of a
three-day holiday weekend, but the downside was limited by
forecasts for warmer weather next week which should stir more
demand.
    Traders said the market was due for a pullback after
climbing earlier this week, particularly with moderate
temperatures expected for the next few days and demand tapering
off during the Memorial Day holiday weekend when many schools
and businesses are closed regardless of weather.
    "I think we just pulled back ahead of the (long) weekend.
The near-term weather looks mild, but the forecast for later
next week and into early June looks pretty bullish," said Steve
Mosley at The SMC Report in Arkansas.
    Front-month gas futures on the New York Mercantile
Exchange ended down 2.4 cents at $4.237 per million British
thermal units after trading between $4.216 and $4.295. 
    Despite the pullback, the front contract finished the week
with a 4.5 percent gain, its second straight weekly rise
following a 3.7 percent increase the previous week.
    Baker Hughes data on Friday showed the gas-directed
rig count was unchanged this week at 354. The count posted an
18-year low of 350 just two weeks ago. 

    Despite a steep decline in dry gas drilling over the last
year and a half, production has not slowed much, if at all. The
Energy Information Administration still expects output in 2013
to post a record high for a third straight year. 
    Most traders viewed Thursday's 89 billion cubic feet weekly
inventory build as supportive, noting it came in below the
Reuters poll estimate of 91 bcf and the five-year average rise
for that week of 90 bcf.  

    Traders said they expected injections to continue to slow in
coming weeks as temperatures heat up and force more homeowners
and businesses to turn on air conditioners.
    Early injection estimates for next week's report range from
80 bcf to 103 bcf versus a 72-bcf build during the same week
last year and a five-year average rise for that week of 92 bcf. 
  
    Mostly below-seasonal temperatures are expected for the
eastern half of the country for the next few days, but Commodity
Weather Group's six- to 10-day forecast calls for warmer
temperatures in the central and eastern United States, with some
much-above-normal readings stretching into the mid-Atlantic.
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