UPDATE 3-U.S. natural gas futures end lower, 2nd straight loss

Mon Sep 23, 2013 3:13pm EDT

* Mild forecasts for next two weeks expected to slow demand
    * No immediate storm threats to U.S. Gulf gas output


    By Joe Silha
    NEW YORK, Sept 23 (Reuters) - Front-month U.S. natural gas
futures ended lower for the second straight session on Monday,
down 2.3 percent in the face of moderate U.S. weather forecasts
for the next two weeks that should finally slow demand for air
conditioning.
    The front contract, which posted a two-month high of $3.82
on Thursday, finished last week nearly flat, gaining just 0.3
percent following a 4.2 percent rise the previous week. The
nearby contract has lost 3.2 percent in the last two sessions.
    "Now that the first day of fall has arrived, the weather is
likely to continue on a path toward moderation as cooling-
related demand starts to dissipate but heating demand is still
not likely to click in just yet," Energy Management Institute
partner Dominick Chirichella said in a report.
    Front-month October gas futures on the New York
Mercantile Exchange, which expire on Thursday, ended down 8.5
cents at $3.602 per million British thermal units, after trading
in a range of $3.596 to $3.681.
    Some traders said the market seemed to be running out of
steam after gaining ground in five of the last six weeks.
Comfortable inventories, record-high gas production and fading
heat as milder autumn weather sets in have stirred doubts among
some investors about further upside.
    In its six-to-10-day outlook, forecaster MDA Weather
Services said warm temperatures across northern tier states and
seasonal-to-cool readings in the South should continue to limit
overall energy demand.
    But some traders said below-normal temperatures in the East
and West this week could trigger some overnight heating load.
    Energy Information Administration data on Thursday showed
total domestic gas inventories stood at 3.299 trillion cubic
feet. Stockpiles were 5 percent below last year's record highs
at that time, but 0.5 percent above the five-year average.
     
    Traders said production shut-ins last week due to flooding
in Colorado might lead to another light storage build in this
week's EIA report. The Thomson Reuters Analytics Group estimates
that 0.5 bcf per day may have been shut in last week. 
    Early injection estimates for Thursday's EIA storage report
range from 61 bcf to 75 bcf. Stocks gained 79 bcf during the
year-earlier week, while the five-year average increase for that
week is 75 bcf.
         
 
    Baker Hughes data on Friday showed the gas drilling
rig count fell by 15 last week to 386 after posting a six-month
high the previous week. 
    The rig count has risen in eight of the last 13 weeks,
stirring talk that new investment in pipelines and processing
plants was allowing producers to pump more gas into an already
well-supplied market.
    The EIA still expects U.S. gas production in 2013 to hit a
record high for the third straight year.
    In the ICE cash market, gas for Tuesday delivery at Henry
Hub , the benchmark supply point in Louisiana,
slipped 4 cents to $3.64, but late Hub differentials firmed to
about 1 cent over NYMEX from a 5-cent discount on Friday.
    Gas on the Transco pipeline at the New York citygate lost 3 cents to $3.77 on the mild Tuesday
outlook, while Chicago was 2 cents lower at
$3.72.
    For daily ICE U.S. cash gas prices, click .
    Despite the rise in tropical activity this month, there were
no significant threats to Gulf of Mexico gas production.
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