March 6, 2013 / 2:56 PM / 5 years ago

UPDATE 3-Profit taking pressures US natgas futures after recent run

* Aggregate inventories remain high, weigh on prices
    * Front-month close below $3.50 possible bearish sign
    * Coming up: EIA, Enerdata natgas storage data Thursday

    By Joe Silha
    NEW YORK, March 6 (Reuters) - Front U.S. natural gas
futures, shrugging off colder U.S. weather forecasts in
mid-March and bullish inventory expectations, ended lower on
Wednesday, pressured by profit taking after posting a six-week
high in the previous session.
    Technical traders said the market was due for a pullback
after moving into overbought territory during Tuesday's run up
to a new recent high. 
    Expectations for a bullish weekly storage report on Thursday
and a major snowstorm slamming the Midwest and Mid-Atlantic may
have kept some sellers cautious, but many traders remain
skeptical of the upside, with winter winding down, storage still
high and production flowing at or near a record peak.
    "There are milder temperatures coming later in the week, but
this was probably profit taking ahead of Thursday's inventory
report," said Steve Platt, analyst at Archer Financial.
    "The close below $3.50 (per million British thermal units)
could put the market back on the defensive," Platt added.
    Front-month gas futures on the New York Mercantile
Exchange ended down 5.9 cents, or 1.7 percent, at $3.47 per
mmBtu, after trading between $3.462 and $3.55.
    The nearby contract, which on Monday settled above $3.50 for
the first time in six weeks, hit a six-week high of $3.594 on  
Tuesday before closing unchanged for the day at $3.529.
    Cold late-winter weather had helped push the front contract
up 12 percent in a little over two weeks and turned the chart
picture more supportive, but some traders agreed that
Wednesday's close below the closely-watched $3.50 support level
could signal an end to the recent uptrend.

    After a milder weekend, MDA Weather Services noted that both
the six-to-10-day and 11-to-15-day forecasts turned colder, with
most of the eastern two-thirds of the nation likely to see
normal or below-normal readings through the third week of March.
    Traders and analysts were waiting for the next U.S. Energy
Information Administration storage report on Thursday, with most
expecting inventories to have fallen by 134 billion cubic feet
last week, according to a Reuters poll.  
    Traders said a draw of that size would be supportive, noting
stocks fell by an adjusted 92 bcf during the same week last
year, while the five-year average drop for that week is 107 bcf.
    Data last week from the EIA showed domestic gas inventories
for the week that ended Feb. 22 had fallen to 2.229 trillion
cubic feet, but storage is still relatively high at 308 bcf, or
16 percent, above the five-year average. 
    Most analysts now expect storage to end the heating season
below 2 tcf, or 13 percent above average but 21 percent below
last winter's record-high finish of 2.48 tcf. 
    The Baker Hughes gas-directed drilling rig count has
fallen in four of the last five weeks and is hovering just above
the 13-1/2 year low hit in early November, but traders noted
production remains high.
    EIA data last week showed that gross natural gas output in
December slipped slightly from November's record high, but most
analysts pegged the decline to cold weather in the Southwest
that temporarily froze wells.
    The EIA expects marketed gas production in 2013 to hit a
record high for the third straight year.
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