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UPDATE 3-Warm trend drives U.S. natgas futures up for third day
June 19, 2013 / 5:42 PM / in 4 years

UPDATE 3-Warm trend drives U.S. natgas futures up for third day

* Hotter weather expected for U.S. Northeast, Midwest
    * Outlook for Texas and the South still fairly mild
    * Tropical storm not seen disrupting U.S. gas production
    * Coming up: EIA, Enerdata natgas storage data on Thursday

 (Adds trader quote, coal data, updates with closing prices)
    By Joe Silha
    NEW YORK, June 19 (Reuters) - U.S. natural gas futures ended
higher for a third straight day on Wednesday, still underpinned
by warm forecasts across northern tier states that should force
more homeowners and businesses to turn up their air
    Gas prices are up more than 6 percent so far this week, with
more gains possible if the forecast holds. The rise follows a 12
percent slide in the previous three weeks as mild late-spring
weather pressured the complex.
    "It's nice in Texas, but it looks like we've got some warmer
weather coming. I think prices could get above $4 next week if
the (hotter) weather shows up," a Texas-based producer said.
    Front-month gas futures on the New York Mercantile
Exchange ended up 5.8 cents, 1.5 percent, at $3.963 per million
British thermal units after trading between $3.906 and $3.983.
    The gas price slide last week to a three-month low of $3.71
came close to making gas competitive with coal for power
generation. But the steep drop in Central Appalachian coal
prices this week to an eight-month low of about $55 per short
ton left coal the fuel of choice for electric utilities.
    MDA Weather Services noted that the six- to 10-day forecast
turned hotter again, with heat expected to dominate the northern
half of the country during the period. The private forecaster
expects near seasonal readings for Texas and the South.
    Most gas traders do not expect Tropical Storm Barry to
disrupt any U.S. oil and gas production in the Gulf of Mexico,
noting the system is expected to cross the Bay of Campeche and
make landfall again on the southern Mexico coast.
    Despite the run-up this week, many traders see only limited
upside unless the heat is sustained, with stockpiles comfortable
and production still flowing at or near a record high.
    Stocks are only slightly below normal for this time of year.
    Traders and analysts polled by Reuters were expecting to see
that total gas inventories climbed last week by 90 billion cubic
feet when the U.S. Energy Information Administration releases
its weekly storage report on Thursday. 
    That would be well above the 63-bcf build seen during the
same week last year and the five-year average increase for that
week of 80 bcf.(Storage graphic:
    While the Baker Hughes gas drilling rig count at 353
is still hovering just above the 18-year low of 350 posted five
weeks ago, U.S. gas production has not slowed much, if at all,
from last year's record high. The EIA still expects gas output
in 2013 to post a record for a third straight year.
    (Rig graphic: )            

 (Additional reporting by Eileen Houlihan; Editing by Jim
Marshall, Nick Zieminski and Sofina Mirza-Reid)

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