UPDATE 3-U.S. natgas futures close down, end week up 2.8 percent

Fri Aug 30, 2013 4:34pm EDT

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* Tropical activity stirs in Atlantic basin
    * Northeast, Midwest heat this week turns milder next week


    By Joe Silha and Eileen Houlihan
    NEW YORK, Aug 30 (Reuters) - U.S. natural gas futures ended
lower on Friday, their first loss of the week as traders took
profits ahead of a long holiday weekend, and ahead of milder
Northeast and Midwest weather next week that should slow overall
demand.
    New York Mercantile Exchange floor trading will be closed on
Monday for the U.S. Labor Day holiday.
    Despite Friday's lower close, the front-month contract rose
2.8 percent this week, its third straight weekly gain, as warm
weather over the last few weeks continued to kick up demand.
    The combined rise of nearly 11 percent since Aug. 9 was the
biggest three-week run up in five months. For the month of
August, the nearby contract logged its first gain in four
months, increasing 3.9 percent.
    Technical traders agreed the market was overbought and due
for a pullback after four straight gains.
    Many traders remained skeptical of the upside, with storage
comfortable, production flowing at or near a record peak and no
sustained heat or significant storm threats on the horizon to
boost demand or trim offshore supplies.
    "There are no immediate storm threats and the temperature
forecasts don't look as bullish as they did a few days ago,"
said Steve Mosley at The SMC Report in Arkansas.
    Front-month gas futures on the New York Mercantile
Exchange ended down 3.7 cents, or 1 percent, at $3.581 per
million British thermal units, after stalling overnight at
$3.653, just shy of Thursday's five-week high of $3.655.
    While tropical activity picked up this week, with reports of
two systems in the Atlantic, traders noted there were no
immediate storm threats to Gulf of Mexico gas production.
    After a few more days of heat forecast for most of the
nation, MDA Weather Services expects near seasonal or below
seasonal temperatures to dominate the eastern half of the nation
in its six- to 15-day outlook, with heat focused in the West.
    The U.S. Energy Information Administration reported on
Thursday that total domestic gas inventories rose 67 billion
cubic feet to 3.130 trillion cubic feet last week. Stockpiles
are about 7 percent below last year's record highs at that time,
but 1.5 percent above the five-year average. 
    Early injection estimates for next week's report range from
45 bcf to 53 bcf. Stocks gained 33 bcf during the same year-ago
week. The five-year average increase for that week is 60 bcf.
    Traders also noted that gas prices sold off today after the
EIA said in its monthly gross gas production report that June
output rose slightly from May and stood at nearly 2 percent
above the same month a year ago.   
 
    Baker Hughes Inc data on Friday showed the
gas-directed rig count fell by seven this week to 380. The gas
rig count posted an 18-year low of 349 in late June.
 
    But recent gas rig count gains, up in six of the last 10
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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