* Weekly inventory decline above estimates for 4th week
* Prices drop despite supportive storage data, near-term
* Record high production also weighs on sentiment
* Coming up: Baker Hughes gas drilling rig data Friday
By Eileen Houlihan and Joe Silha
NEW YORK, Jan 24 U.S. natural gas futures slid
more than 3 percent on Thursday, ending lower for a third
straight day, on profit taking despite cold weather in consuming
regions in the eastern United States and a larger-than-expected
weekly drawdown from inventories.
"A bullish weekly inventory report was not enough to push
the natural gas market back into positive territory, nor was the
latest government short-term weather forecast which was more
supportive than the prior day's forecast," noted Energy
Management Institute's Dominick Chirichella.
"The market may be slowly moving into a mode of too little
too late so to speak as February is the only month of the
remaining winter heating season that is currently projected to
experience winter-like weather over major portions of the
country," he added.
Thursday's gas storage report from the U.S. Energy
Information Administration showed inventories fell last week by
172 billion cubic feet, above industry expectations for a
Most traders viewed the decline as supportive, noting it was
the fourth straight week declines have topped industry
But some said the market was due for a technical pullback
after posting a three-month low of $3.05 per million British
thermal units at the start of the month, then shooting up to a
more than six-week high of $3.645 early this week.
"We've seen some very bullish storage numbers in the last
few weeks and had a good price run-up. I think some of the new
length may be taking profits, but I don't see a lot of downside
with forecasts still looking fairly cold," a Massachusetts-based
Front-month February natural gas futures on the New York
Mercantile Exchange slid 10.8 cents, or just over 3
percent, to settle at $3.446 per mmBtu. The contract traded
between $3.441 and $3.592.
Other months ended lower as well, with the March contract
down 9.9 cents, or nearly 3 percent, to $3.454 and summer
months ending down about 8 cents each.
Traders said prices could stall here with temperatures
expected to turn milder next week and slow demand. But few
expect much downside, with nuclear plant outages still running
well above normal and another shot of cold air forecast for the
MDA Weather Services on Thursday noted its six to 10-day
forecast turned warmer again for the South and East, but the
private forecaster expects the next round of cold to hit the
Midwest by the middle of next week, then spread east, dropping
temperatures to far-below-normal in early February.
ANOTHER BIG STORAGE DRAW, BUT STOCKS ABOVE AVERAGE
Traders said the recent larger-than-expected inventory draws
could be reflecting new growth in gas use this year as utilities
have switched from coal to cheaper gas for power generation.
But despite the large withdrawals, storage remains at 2.996
trillion cubic feet, about 5 percent below year-earlier levels,
but 12 percent above the five-year average.
Inventories started the heating season in early November at
3.929 tcf, the fourth straight year in which they have headed
into the heating season at a record peak.
Early withdrawal estimates for next week's storage report
range from 195 to 210 bcf versus the 149 bcf pulled from
inventory during the same week last year and the five-year
average decline for that week of 178 bcf.
If drawdowns for the rest of winter match the five-year
average pace, inventories will end March at 2.048 tcf, about 18
percent above normal, but 17 percent below last year when stocks
finished the mild winter at 2.48 tcf, an end of winter record
DRILLING RIG COUNT SLIDES, BUT OUTPUT NEAR RECORD
Traders await the next Baker Hughes gas drilling report to
be released on Friday. Data last week showed the gas-directed
rig count fell by five to 429, its second straight weekly loss.
Drilling for natural gas has mostly declined for more than a
year, with gas rigs down 54 percent since peaking at 936 in
But the EIA also said recently that it expected gas output
in 2013 to rise to 69.84 bcf per day, the third straight annual