November 8, 2013 / 3:17 PM / 4 years ago

UPDATE 3-Chilly weather drives U.S. natural gas futures up for 4th day

* Chilly near term forecasts underpin price gains
    * Growing supplies, milder midmonth outlook limit upside

    By Joe Silha
    NEW YORK, Nov 8 (Reuters) - U.S. natural gas futures ended
higher for a fourth straight day on Friday, backed by chilly
weather forecasts for the eastern half of the country over the
next 10 days that should force more homeowners and businesses to
turn up their heaters.
    Front-month futures, which posted a contract low and 2-1/2
month low of $3.379 per million British thermal units on
Tuesday, gained 3.3 percent in the last four sessions and
finished the week up 1.3 percent. It was the first weekly rise
for the nearby contract in four weeks.
    "The market got overextended to the downside last week, but
the weather forecast doesn't look as bearish this week," said
Steve Mosley at The SMC Report, noting last week's 5.2 percent
slide was the largest weekly decline in two months. 
    Many traders remained skeptical of the upside despite this
week's gains, with stockpiles comfortable, production flowing at
a record high pace and another warm-up expected late next week,
particularly for the Midwest.
    Front-month gas futures on the New York Mercantile
Exchange ended up 4 cents, or 1.1 percent, at $3.559, after
trading between $3.51 and $3.589.
    MDA Weather Services expects below normal temperatures to
dominate the eastern half of the United States for the next 10
days. But the forecaster does expect milder readings in its
11-to-15-day outlook, particularly for the Midwest and
    Traders mostly shrugged off Thursday's 35 million cubic feet
weekly inventory build, noting it matched the Reuters poll
estimate and came in close to the five-year average for that
week. Most viewed the injection as neutral for prices.
    The U.S. Energy Information Administration reported that
total gas inventories rose last week to 3.814 trillion cubic
feet, 2.9 percent below last year's record highs at that time
but 1.5 percent above the five-year average. 
    Early injection estimates for next week's storage report
range from 16 bcf to 36 bcf. That would compare to a 12 bcf draw
during the same year-ago week and the five-year average increase
of 19 bcf for that week.
    Baker Hughes data showed that the gas drilling rig
count rose this week for the third time in four weeks, gaining
five to 365. The gas rig count has risen in 12 of the last 20
    A rising gas rig count can stir talk that new pipelines and
processing plants, particularly in the East, may be encouraging
producers to hook up more wells and pump more supply into an
already well-supplied market.
    The EIA still expects U.S. gas production in 2013 to hit a
record high for the third straight year.   
    In the ICE cash market, gas for weekend delivery at Henry
Hub , the benchmark supply point in Louisiana,
slipped 3 cents to $3.54, with late differentials weakening to
about 6 cents under NYMEX from a 3-cent discount on Thursday.
    Gas on the Transco pipeline at the New York citygate tumbled 24 cents to $3.35 despite the chilly
outlook, undermined by the typical drop in weekend demand.
Chicago was 8 cents lower at $3.66. 
    For daily ICE U.S. cash gas prices, click on .
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