* Milder Northeast, Midwest weather should slow demand
* Tropical Storm Dorian dissipates, no threat to production
(Adds byline, analyst quote, technicals, updates with closing
By Eileen Houlihan and Joe Silha
NEW YORK, July 29 U.S. natural gas futures ended
sharply lower on Monday as forecasts for mild weather, that
should lessen air conditioning use, drove front-month August
contract to a five-month low before its expiration.
It was the fourth straight loss for the nearby contract,
which shed 6.2 percent last week in its biggest weekly decline
in eight months.
Traders noted that forecasts for cooler weather over the
weekend dimmed prospects for air conditioning demand at least
through the middle of August. In addition, Tropical Storm Dorian
dissipated over the weekend, diminishing any potential
disruptions to Gulf of Mexico oil and gas production.
While the peak of the hurricane season in late August and
early September is still ahead, there are no near-term storm
threats to offshore Gulf Coast energy operations.
"There is a conspicuous absence of bullish drivers.
Production has not wavered this summer ... (and) the
unseasonably cool temperatures will lead to reduced natural gas
demand for the next two weeks," Gelber & Associates analyst
Aaron Calder said in a report.
Front-month August natural gas futures on the New York
Mercantile Exchange expired down 9.6 cents, or 2.7
percent, at $3.459 per million British thermal units after
sliding early to a five-month low of $3.413.
Chart watchers said Monday's front-month close below key
support at $3.50 was bearish and likely to trigger more selling.
They pegged minor support at $3.40, with better buying
likely at the $3.294-3.32 gap from late February.
Many traders see more pressure ahead for futures prices,
with stockpiles comfortable, production still flowing at or near
a record high and no extreme heat on the horizon to lift demand.
Forecaster MDA Weather Services noted that both the
six-to-10-day and 11-to-15-day forecasts turned cooler over the
weekend, with normal or below-normal temperatures expected for
most of the eastern half of the country for the next two weeks.
Baker Hughes data on Friday showed the gas-directed
rig count was unchanged last week at 369 following four straight
While the count remains not far above the 18-year low of 349
posted late last month, the U.S. Energy Information
Administration still expects gas output in 2013 to hit a record
high for a third straight year.
Weekly inventory builds reported by the EIA have fallen
below average for two straight weeks, but many traders expect
mild temperatures ahead to open the door to much bigger
injections in coming weeks.
Early build estimates for Thursday's storage report range
from 53 billion to 63 billion cubic feet. Stocks rose by 28 bcf
during the same week last year, while the five-year average
increase for that week is 47 bcf.
Total domestic gas inventories of 2.786 trillion cubic feet
are hovering just 1.6 percent below the five-year average,
according to EIA data released on Thursday.
(Editing by Jeffrey Benkoe, Lisa Von Ahn, Kenneth Barry and Bob