UPDATE 3-U.S. natgas futures end up on weather, EIA stocks data
* Weekly EIA storage build seen by some as supportive * Warm 6-10 day forecast for northern tier also backs gains * South and Texas expected to remain cool for next two weeks * Tropical Storm Erin forms in eastern Atlantic Ocean * Coming Up: Baker Hughes rig data, CFTC trade data Friday (Adds analyst quote; updates storm report, closing prices) By Joe Silha NEW YORK, Aug 15 (Reuters) - U.S. natural gas futures ended higher on Thursday, backed by a slightly supportive weekly inventory report and warmer forecasts for northern-tier states next week that should prompt more homeowners and businesses to turn up their air conditioners. The U.S. Energy Information Administration reported that total domestic gas inventories rose last week by 65 billion cubic feet to 3.006 trillion cubic feet. Some traders viewed the build as supportive, noting it came in below the Reuters poll estimate of 70 bcf. But others noted that the weekly gain exceeded the five-year average for the third straight week, a trend that if continued could set up a test of last November's record high stocks of 3.929 tcf. "Today's 65 bcf storage injection clocked in on the constructive side relative to street estimates ... but the build is much larger than what we typically see for this time of year," Mike Tran at CIBC World Markets said in a report. Front-month gas futures on the New York Mercantile Exchange ended up 7.7 cents, or 2.3 percent, at $3.419 per million British thermal units, after climbing to an intraday high of $3.427 late in the session. The nearby contract posted a 5-1/2-month low of $3.129 last Thursday. Gas prices had mostly been on the defensive in the previous three weeks, sliding about 15 percent during that period as Northeast and Midwest temperatures turned milder. But nearby futures have edged up 5.9 percent so far this week as forecasts turned warmer and two tropical systems sprang up to remind traders that the peak of the Atlantic hurricane season in late August and early September was still ahead. The U.S. National Hurricane Center said Tropical Storm Erin formed in the eastern Atlantic Ocean early Thursday, but most early computer tracks showed the system steering in a northerly or northwesterly direction and missing key oil and gas producing areas in the Gulf of Mexico. A second low pressure system over Mexico's Yucatan Peninsula was also not seen as a threat to offshore output, with current tracks mostly showing it heading west across the southern Gulf of Mexico toward the Mexican coast. After a fairly cool week in the Northeast and Midwest, MDA Weather Services noted that northern-tier temperatures were still expected to warm up next week, then moderate some in the 11- to 15-day outlook. Relatively cool weather was forecast for Texas and the Southeast for the next two weeks. Despite the market's attempts to rally this week, many traders remain skeptical of the upside, with inventories now above normal, production flowing at or near a record peak and no broad-based heat wave around to sustain a boost in demand. The weekly gas storage build trimmed the deficit relative to last year by 45 bcf to 252 bcf, or 8 percent below last year's record highs at that time. It also added 23 bcf to the surplus versus the five-year average, leaving stocks 43 bcf, or 1.5 percent, above that benchmark. More above-average builds are expected in coming weeks, with early estimates for next week's report ranging from 71 bcf to 76 bcf. Stocks rose by 43 bcf during the same year-ago week, while the five-year average increase for that week is 56 bcf. Traders were waiting for the next Baker Hughes drilling rig report on Friday. Recent gains in the gas drilling rig count have stirred concerns that new investment in gas pipelines and processing plants will allow producers to pump even more supply into an already well-supplied market. The EIA still expects gas output in 2013 to hit a record high for a third straight year. (Additional reporting by Eileen Houlihan; Editing by Alden Bentley, Chizu Nomiyama and Chris Reese)
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