* EIA build falls below 5-year average for 2nd straight week
* Milder Northeast, Midwest weather expected to slow demand
* Tropical Storm Dorian in central Atlantic -U.S. NHC
* Coming up: Baker Hughes rig data, CFTC trade data Friday
(Adds analyst's quote, updates with closing prices)
By Joe Silha
NEW YORK, July 25 U.S. natural gas futures ended
lower on Thursday as traders shrugged off a supportive weekly
inventory report and focused instead on fairly mild weather
forecasts for the next two weeks that should slow demand for air
The U.S. Energy Information Administration reported that
total domestic gas inventories rose last week by 41 billion
cubic feet to 2.786 trillion cubic feet.
The build could have been viewed as supportive, falling
below the Reuters poll estimate of 46 bcf and below the
five-year average increase for that week of 53 bcf. It was the
second straight week that injections fell below the norm.
But while last week was the hottest week so far this year,
traders said mild temperatures ahead should open the door to
bigger injections in coming weeks.
"I was not surprised to see the bearish reaction to the
(EIA) number," said Richard Hastings, macro strategist at Global
Hunter Securities in North Carolina. "The bullish environment
from a week ago was really taken apart over the last few days as
the near-term weather forecast turned against the gas market."
Front-month August gas futures on the New York
Mercantile Exchange, which expire on Monday, ended down 5.4
cents, or 1.5 percent, at $3.644 per million British thermal
units. The contract shot up to an intraday high of $3.759 right
after the EIA report, then slid to an intraday low of $3.64.
The front contract, which posted a four-week high of $3.835
late last week, is down 3.8 percent so far this week after
gaining 6.3 percent in the previous three weeks.
With no extreme heat on the horizon, many traders expect any
upside to be difficult, particularly with storage comfortable
and production still flowing at or near a record high.
Forecaster MDA Weather Services called for below-normal
temperatures across much of the nation in its one- to five-day
forecast, with mostly seasonal readings for the eastern half of
the country expected during the six- to 10-day period.
The weekly storage build trimmed 15 bcf from the deficit
relative to last year, leaving stocks at 399 bcf, or 12.5
percent below last year's record highs at that time. But it
increased the shortfall versus the five-year average by 12 bcf
to 46 bcf, or 1.6 percent below that benchmark.
Traders were waiting for the next Baker Hughes
drilling rig report on Friday. The gas rig count has climbed for
four straight weeks but is still hovering just above an 18-year
low hit late last month.
The EIA still sees 2013 gas output posting a record high for
a third straight year.
The U.S. National Hurricane Center said Tropical Storm
Dorian in the central Atlantic Ocean had strengthened slightly
Thomson Reuters unit Weather Insight said there was a 60
percent chance the system would strengthen into a hurricane, but
just a 10 percent chance it would move into the Gulf of Mexico,
where it could disrupt offshore energy production.
(Additional reporting by Eileen Houlihan; Editing by Maureen
Bavdek, Sofina Mirza-Reid and Peter Galloway)