* Front month remains above recent four-month spot low
* Above-normal temperatures on tap for both coasts
* Nuclear plant outages back above average
By Eileen Houlihan
NEW YORK, July 3 U.S. natural gas futures rose
for a third straight day on Wednesday, reversing early losses,
as traders blamed short covering ahead of the U.S. Independence
Day holiday on Thursday and hotter weather expected for the
Northeast next week.
"The latest National Weather Service six to 10-day and eight
to 14-day temperature forecasts have not changed very much, with
both coasts still expecting above-normal temperatures and the
middle of the country forecast to experience normal to below
normal temperatures," said Energy Management Institute partner
"The call on natural gas for weather-related demand should
be modestly above normal over the next several weeks but
possibly not enough to result in a huge underperformance in the
weekly inventory injections for the same timeframe," Chirichella
Traders noted despite heat in the Northeast last week, this
week's government storage report showed a build in line with
expectations and the five-year average.
"Considering there was some fairly intense heat last week
and it only translated into neutral storage data it suggests
that it will take even more extraordinary weather to produce a
bullish result," said Citi Futures energy analyst Tim Evans.
Weekly data from the U.S. Energy Information Administration
showed total domestic inventories rose last week by 72 billion
cubic feet, in line with Reuters poll estimates for a 71 bcf
build and the five-year average build of 71 bcf for that week.
This week's report was released one day earlier than usual
due to the July 4 holiday on Thursday. Floor trading on the New
York Mercantile Exchange will be closed Thursday for the
Front-month August natural gas futures on NYMEX rose
3.6 cents, or just under 1 percent, to settle at $3.69 per
million British thermal units.
The contract traded between $3.573 and $3.695. It slid to a
near four-month low of $3.526 on Friday.
Other months ended higher for a third day as well, with the
September contract rising 3.8 cents, also 1 percent, to
$3.689, and winter months gaining about 3 cents each.
Traders said hotter weather on tap for consuming regions in
the Northeast next week and above-normal nuclear plant outages
should keep near-term demand firm, but most expect further
upside to be limited by milder weather forecast for the
mid-Continent and healthy inventories.
Total gas inventories at 2.605 trillion cubic feet are about
16 percent below last year's record high level, but only 1
percent below the five-year average level.
Early injection estimates for next week's storage report
range from 82 bcf to 102 bcf, versus a 34 bcf build during the
same week last year and a five-year average increase for that
week of 74 bcf.
In the cash market, gas for delivery Thursday and Friday at
the NYMEX benchmark, Henry Hub in Louisiana, slid 4
cents to $3.54, with late deals easing to 12 cents under the
front month, compared with deals done late Tuesday at a 4-cent
Gas on the Transco pipeline at the New York citygate fell 6 cents on the day to $3.65.
The latest National Weather Service six to 10-day forecast
issued Tuesday called for above-normal temperatures for both
coasts and normal or below-normal readings in the middle of the
Nuclear plant outages totaled 5,800 megawatts, or 6 percent
of U.S. capacity, down from 8,600 MW out a year ago, but up from
5,700 MW out on Tuesday and a five-year average outage rate of
Baker Hughes data showed the gas drilling rig count
rose for a second straight week, gaining 2 to 355, after posting
an 18-year low of 349 three weeks ago.