UPDATE 3-U.S. natgas futures end down despite cold, 1st loss in 3 days

Mon Nov 18, 2013 3:15pm EST

* Late technical selling pressures futures prices

* Cold extended forecast should lift demand, limit downside

* Comfortable storage, record production weigh on sentiment

By Joe Silha

NEW YORK, Nov 18 (Reuters) - U.S. natural gas futures reversed course and ended lower for the first time in three sessions on Monday, as early buying on cold weather forecasts gave way to a late wave of technical selling and profit taking at resistance.

"The weather forecasts looked more bullish today, but traders might be eying technical resistance above $3.70 (per mmBtu) and opting to get out of some of their long positions," said Aaron Calder, analyst at Gelber & Associates in Houston.

Calder noted the front contract briefly poked above $3.70 several times early in the session but could not hold above it.

After another day or two of mild weather, private forecaster MDA Weather Services expects mostly below-normal temperatures to dominate the eastern two-thirds of the nation in its six- to 15-day outlook.

Front-month gas futures on the New York Mercantile Exchange ended down 4.3 cents, or 1.2 percent, at $3.617 per million British thermal units, after climbing early to a 3-1/2-week high of $3.705.

The nearby contract finished up 2.8 percent last week for its second straight weekly gain, following a 1.3 percent rise in the previous week.

Technical traders said the front month needed a close above resistance in the low-$3.70s to set the stage for more upside.

But with stockpiles at comfortable levels and production flowing at a record-high pace, many traders remained skeptical of further gains unless the cold is sustained.

With over a billion cubic feet per day of new gas flowing from Marcellus shale this month and more supply likely coming, many traders agreed that temperatures this winter will have to stay cold if prices are to avoid testing the $3 mark.

Traders are expecting the season's first draw when the U.S. Energy Information Administration on Thursday releases its gas inventory report for the week ended Nov. 15.

Early withdrawal estimates range from 15 to 41 billion cubic feet. That would compare with a 36 bcf decline in the year-earlier week and a five-year average draw of 2 bcf for that week.

EIA reported last week that total domestic gas inventories stood at 3.834 trillion cubic feet, just 2 percent below last year's record highs at that time but 1.5 percent above the five-year average.

Baker Hughes data last week showed the gas drilling rig count rose for the fourth time in five weeks, gaining five to 370. The count has risen in 13 of the last 21 weeks.

A rising count can stir talk that 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 expects U.S. gas production in 2013 to hit a record high for the third straight year, then climb again in 2014.

In the ICE cash market, prices for Tuesday delivery at Henry Hub , the benchmark supply point in Louisiana, climbed 15 cents to $3.71, with late differentials firming slightly to 3 cents under NYMEX from a 4-cent discount Friday.

Gas on the Transco pipeline at the New York citygate jumped 72 cents to $3.80 on the chilly Tuesday outlook. Chicago rose 10 cents to $3.73.

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