UPDATE 3-Cold forecast props up U.S. natgas futures for 2nd day

Fri Nov 15, 2013 3:31pm EST

* Cold extended forecast supports prices, despite warm-up
    * Comfortable storage, record production also weigh


    By Joe Silha
    NEW YORK, Nov 15 (Reuters) - U.S. natural gas futures ended
higher for a second straight day on Friday as investors shrugged
off mild weekend weather forecasts and focused instead on the
colder temperature outlook for next week that should increase
heating demand.
    After a brief warm-up in the Northeast and Midwest late this
week, Commodity Weather Group said the six- to 15-day forecast
remains variable, but cool temperatures are expected across much
of the East and South.
    "People are looking ahead to the next storage report which
should be constructive, and the weather forecasts mostly look
supportive for the rest of the month after this warm spell is
over," said Steve Mosley at The SMC Report in Arkansas.
    Front-month gas futures on the New York Mercantile
Exchange ended up 5.5 cents, or 1.5 percent, at $3.66 per
million British thermal units, after trading between $3.575 and
$3.667.
    The nearby contract finished the week up 2.8 percent, its
second straight weekly gain following a 1.3 percent rise the
previous week. The combined run up of 4.2 percent since Nov. 1
was the biggest two-week climb in four weeks. 
    But with stockpiles at comfortable levels and production
flowing at a record-high pace, many traders remain skeptical of
the upside, at least until more sustained cold lifts demand.
    With over a billion cubic feet per day of new gas flowing
from Marcellus shale this month and more supply likely coming,
many traders agree that temperatures this winter will have to
stay cold if prices are to avoid testing the $3 mark.    
    Most traders viewed Thursday's 20-billion-cubic-foot weekly
natural gas inventory build as neutral for prices.
    The data reported by the U.S. Energy Information
Administration showed that total domestic gas inventories of
3.834 trillion cubic feet were just 2 percent below last year's
record highs at that time but 1.5 percent above the five-year
average. 
    That build should be the last of the season, with early
estimates for next week's storage report looking for a
withdrawal of 15 bcf to 41 bcf. That would compare with a 36 bcf
draw in the year-earlier week and a five-year average draw of 2
bcf for that week.             
       
    Baker Hughes data on Friday showed the gas drilling
rig count rose this week for the fourth time in five weeks,
gaining five to 370. 
    The gas rig count has risen in 13 of the last 21 weeks,
stirring talk new pipelines and processing plants, particularly
in the Northeast, may be encouraging producers to hook up more
wells and pump more gas into an already well-supplied market.
    The EIA on Wednesday raised its estimate for domestic
natural gas production in 2014, forecasting output would be up
more than 1 percent from 2013's record-high levels.
 
    In the ICE cash market, gas for weekend delivery at Henry
Hub , the benchmark supply point in Louisiana, edged
up 4 cents to $3.56, with late differentials firming slightly to
4 cents under NYMEX, from a 5-cent discount on Thursday.
    Gas on the Transco pipeline at the New York citygate tumbled 35 cents to $3.08 on the mild weekend 
outlook. Chicago rose 7 cents to $3.63 ahead of
the colder weather expected early next week. 
    For daily ICE U.S. cash gas prices, click on .
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