UPDATE 3-US natgas futures end down for 2nd day after front tests 6-mth high
* Much colder weather next week should stir demand
* Record production, comfortable storage could limit upside
* Coming up: EIA natgas storage data on Thursday (Updates with closing prices, quote)
By Joe Silha
NEW YORK, Dec 4 (Reuters) - U.S. natural gas futures ended lower for a second straight day on Wednesday, as profit taking after recent strong gains and ahead of a weekly inventory report on Thursday offset cold weather forecasts for next week that should stir more demand.
Chilly temperatures in November had helped drive the front month contract up 12.6 percent in the four weeks ended Friday, its biggest four-week climb in eight months. On Tuesday, the front month posted a six-month high of $4.017 per mmBtu before long liquidation set in and the contract posted its first loss in nine sessions.
"It's still going to be pretty cold, but this is the second day in a row we couldn't hold above $4. People have to be asking how much more bullish can the weather forecast get," said Kyle Cooper, managing partner at IAF Advisors in Houston.
Many traders agree that the rally seems to have run into resistance amid uncertainty about just how long the coming cold will last.
Commodity Weather Group expects temperatures across much of the country to dip sharply next week, with some much below normal readings stretching from the Midwest to Texas. But the private forecaster noted that the 11-to-15 outlook continues to progress warmer though confidence remained very low.
Front-month gas futures on the New York Mercantile Exchange ended down 1.6 cents at $3.96 per million British thermal units after stalling early at $4.013, just shy of the Tuesday's six-month high.
While the technicals turned bullish during the steady run-up over the last month, chart watchers said the front contract needed to settle above $4 to set the stage for more upside.
With stockpiles at comfortable levels and production flowing at a record-high pace, many traders remained skeptical about further gains unless weather remained cold.
El Paso, in a critical notice to pipeline shippers on Tuesday, cautioned about the potential for supply shortfalls due to well freeze-offs from the coming cold.
Traders and analysts polled by Reuters on average expect a withdrawal of 138 billion cubic feet when the U.S. Energy Information Administration on Thursday releases its weekly storage report.
That would be well above the 62 bcf decline in the year-earlier week and the five-year average drop of 41 bcf for that week.
EIA data last week showed total gas inventories had fallen to 3.776 trillion cubic feet, 2.6 percent below last year's record highs at that time, but 0.5 percent above average.
Despite recent declines in the Baker Hughes gas drilling rig count, production has not showed any signs of slowing. The EIA expects U.S. gas production in 2013 to reach a record high for the third straight year, then climb again in 2014.
In the ICE cash market, prices for Thursday delivery at Henry Hub GT-HH-IDX, the benchmark supply point in Louisiana, edged up 5 cents to $3.88, with late differentials firming slightly to 11 cents under NYMEX from a 14-cent discount on Tuesday.
Gas on the Transco pipeline at the New York citygate E-TSCO6NY-IDX gained 1 cent to $3.84 despite the mild Thursday outlook, while Chicago MC-CHICIT-IDX was 10 cents higher at $4.13.
For daily ICE U.S. cash gas prices, click <0#GAS-IDX=ICE>. (Additional reporting by Eileen Houlihan; Editing by David Gregorio and Meredith Mazzilli)
- Malaysia Airlines plane missing, presumed crashed in South China Sea |
- China draws 'red line' on North Korea, says won't allow war on peninsula
- Malaysian plane crashed off Vietnam coast: state media
- No signal picked up from missing Malaysia Airlines plane-Vietnam official