June 26, 2013 / 2:10 PM / in 5 years

UPDATE 3-Short cover props up U.S. July natgas futures at expiration

* Forecasts turn warmer for northern tier states
    * Short covering lifts futures ahead of July expiration
    * Coming up: EIA, Enerdata natgas storage data Thursday

    By Joe Silha
    NEW YORK, June 26 (Reuters) - U.S. natural gas futures ended
higher on Wednesday, underpinned by a slightly warmer extended
weather outlook and some technical buying and short covering
ahead of the July contract expiration.
    "There's a little heat around, but no big change in the
fundamentals. The market got beat up pretty good over the last
few days, so today it looked like shorts covering ahead of
expiration and ahead of Thursday's inventory report," a
Chicago-based trader said.
    Despite Tuesday's break of chart support, many technical
traders agreed front-month futures were oversold and due for a
short-covering bounce after losing 8 percent in the previous
four sessions, their biggest four-day drop in seven weeks.
    Front-month July gas futures on the New York
Mercantile Exchange expired up 6 cents, or 1.7 percent, at
$3.707 per million British thermal units after slipping early to
a 3-1/2-month low of $3.635. 
    Hot weather remains in the West for the next two weeks, but
private forecaster MDA Weather Services noted that the Northeast
was slowly trending warmer, with higher readings also expected
to stretch across northern tier states late in the period.
    But many traders remain skeptical of the upside without a
sustained, broad-based heat wave to stir demand, particularly
with gas inventories only slightly below normal for this time of
year and production flowing at or near a record high.
    Traders and analysts polled by Reuters expect to see an
increase of 88 billion cubic feet in gas inventories when the
U.S. Energy
    The Baker Hughes gas drilling rig count fell to
another 18-year low last week, but U.S. gas production has not
slowed much, if at all, this year.

    The EIA expects gas output in 2013 to post a record high for
a third straight year.
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