* Forecasts turn cooler for most of eastern U.S.
* Warmer weather still expected to move into the Northeast
By Joe Silha
NEW YORK, June 28 U.S. natural gas futures ended
lower on Friday, with mild weather forecasts for most of the
eastern half of the nation next week driving the front contract
to a 3-1/2 month low despite expectations for some record heat
"The early July temperature forecast looks very bearish for
next week. It shows cooler air moving into the central U.S.,"
said Steve Mosley at The SMC Report in Arkansas.
Traders said recent bearish weekly inventory reports also
triggered some selling, noting prices sold off more than 4
percent on Thursday after the Energy Information Administration
reported that stocks climbed last week by 95 billion cubic feet.
That was well above market expectations of 88 bcf and the
five-year average gain for that week of 79 bcf.
Inventory builds have exceeded the five-year average for the
last four weeks and prompted some analysts to raise estimates
for peak storage this year. But most still expect stocks to head
into next heating season below last year's record high.
Front-month gas futures on the New York Mercantile
Exchange ended down 1.7 cents at $3.565 per million British
thermal units after slipping early to a 3-1/2 month low of
$3.526. The front contract, which fell 5.5 percent this week,
finished the month 10.5 percent lower.
For the second quarter, the contract logged an 11 percent
loss though it is still up about 6 percent so far this year.
Heat remains focused in the West for the next two weeks, but
temperatures were also expected to trend warmer for the
Northeast and the upper Midwest during the period, according to
forecaster MDA Weather Services. Readings in the central and
southeast states were expected to average below normal.
With gas inventories only slightly below average for this
time of year and production still flowing at or near a record
peak, many traders expect prices to remain on the defensive
until a broader-based heat wave arrives and kicks up demand.
Baker Hughes data on Friday showed the gas drilling
rig report rose this week by four to 353 after posting an
18-year low the previous week.
Despite the slowdown in gas drilling over the last 20
months, EIA expects gas output in 2013 to post a record high for
a third straight year.