UPDATE 3-U.S. natural gas futures end lower, finish week up 3.5 pct

Fri Aug 23, 2013 3:20pm EDT

* Front-month futures pull back after recent gains
    * Northeast, Midwest weather trends warmer for next week


    By Joe Silha
    NEW YORK, Aug 23 (Reuters) - U.S. natural gas futures ended
lower on Friday, pressured by technical selling after strong
gains earlier in the week, but the downside was limited by
prospects for more demand next week as the Northeast and Midwest
turn warmer.
    Front-month futures, backed by bullish weekly inventory data
 and the warmer extended weather outlook, gained 3.5 percent
this week, moving past some key chart resistance along the way.
    But some technical traders said the front contract was
overbought and due for a pullback, noting it was the second
straight weekly rise. The combined gain of 7.9 percent was the
biggest two-week run-up in three months.
    "Natural gas prices are weaker on light profit-taking ahead
of the weekend. Updated temperature forecasts look mixed, with
the 6-10 day period looking a tick warmer, but the 11-15 day
forecast a tick cooler," Citi Futures analyst Tim Evans said.  
    Front-month gas futures on the New York Mercantile
Exchange ended down 6 cents, or 1.7 percent, at $3.485 per
million British thermal units, after climbing overnight to a
four-week high of $3.562.
    Most traders viewed Thursday's weekly inventory build of 57
billion cubic feet as bullish for prices, noting it came in well
below the Reuters poll estimate of 69 bcf and below the lowest
estimate in that poll of 61 bcf.     
    But many traders remain skeptical about recent gains, with
inventories above normal, production flowing at or near record
levels, and summer temperatures likely to wind down soon.
    After a fairly mild weekend, forecaster Commodity Weather
Group said the six- to 10-day outlook was for warmer weather,
particularly for the Midwest, with temperatures at times
expected to climb to about 90 degrees Fahrenheit.    
    The U.S. Energy Information Administration on Thursday
reported that total domestic gas inventories last week stood at
3.063 trillion cubic feet, about 1.5 percent above average.
    Early injection estimates for next week's report range from
53 bcf to 69 bcf. Stocks gained 64 bcf during the same year-ago
week. The five-year average increase for that week is 66 bcf.
    A Reuters end-of-injection-season poll on Wednesday showed
analysts expect inventories to peak this year at 3.852 tcf, shy
of last year's record but up from a poll estimate in June of
3.767 tcf.  
    
    Baker Hughes data on Friday showed the gas-directed 
rig count fell by one this week to 387. The gas rig count posted
an 18-year low of 349 eight weeks ago. 
    But recent gas rig count gains - the count has risen in six
of the last nine weeks - have stirred concerns that new
investment in gas pipelines and processing plants are allowing
producers to hook up more wells and 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.
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