* Mild weather this week slows demand, cold returns next
* Record production, comfortable storage could limit upside
By Joe Silha
NEW YORK, Dec 2 U.S. natural gas futures
shrugged off this week's milder weather to end higher on Monday,
with the front month driven to a six-month high by colder
weather forecasts for next week that should trigger another
strong run up in heating demand.
The nearby contract, which has gained for eight straight
sessions, finished the holiday-shortened week last week up 4.9
percent. Chilly temperatures in November helped drive the front
month up 12.8 percent, its biggest four-week climb in nearly
While milder weather this week could prompt some profit
taking or long liquidation, traders said the much colder outlook
for next week should help limit any downside even with lingering
concerns about comfortable inventories and record high domestic
"Current weather forecasts paint a very cold picture for
December with frigid air expected to sweep through the nation
creating a large amount of heating demand in the Northeast and
Midwest," Gelber & Associates analyst Aaron Calder said, noting
the deep freeze was also expected to reach into Texas.
After a mild week this week, private forecaster MDA Weather
Services expects cold temperatures to stretch across most of the
country next week and continue in northern tier states in the
11- to 15-day period.
Front-month gas futures on the New York Mercantile
Exchange settled up 3.4 cents, or 0.9 percent, at $3.988 per
million British thermal units. The contract posted a six-month
high of $3.993 in after hours trade following the day session
While the technicals turned bullish during the steady run-up
over the last month, chart watchers expect resistance in the $4
area, noting the contract has moved into very overbought
territory with the 14-day relative strength index now at an
8-1/2 month high of 83, according to Reuters data.
Data last week from the U.S. Energy Information
Administration (EIA) showed total domestic gas inventories stood
at 3.776 trillion cubic feet, 2.6 percent below last year's
record highs at that time, but still 0.5 percent above the
Early withdrawal estimates for Thursday's storage report
range from 109 bcf to 148 bcf, well above the 62 bcf drop during
the same year-ago week and the five-year average decline of 41
bcf for that week.
Baker Hughes last week reported that the gas
drilling rig count fell for the second straight week, but the
declines have been minimal. The count at 367 remains above the
18-year low of 349 set in late June.
The EIA expects U.S. gas production in 2013 to reach a
record high for the third straight year, then climb again in
In the ICE cash market, prices for Tuesday delivery at Henry
Hub , the benchmark supply point in Louisiana,
climbed 5 cents to $3.84, but late differentials slid to about
14 cents under NYMEX from a 6-cent discount last Wednesday.
Gas on the Transco pipeline at the New York citygate lost 5 cents to $3.82 on the mild midweek
while Chicago was 3 cents higher at $3.92.