By Joe Silha
NEW YORK, Feb 11 (Reuters) - Front-month U.S. natural gas
futures lost ground for a third straight day on Monday,
pressured by forecasts for milder weather in the Northeast and
Midwest early this week, which should slow demand for gas used
to heat homes and businesses.
Despite a blizzard that pounded the Northeast over the
weekend, traders noted that winter was winding down and few
expected much upside in prices. Inventories remain high,
production is at or near an all-time peak, and there is not
enough sustained cold to put a serious dent in excess supplies,
'The forecast looks a little warmer. We are going to get
more cold, but relative to January it's not a big deal,' a
Pennsylvania trader said, noting temperatures were expected to
drop below normal late this week and early next week but normal
highs were on the rise with only five more weeks left in winter.
At 12:10 p.m. EST (1710 GMT), front-month gas futures
on the New York Mercantile Exchange were down 1.8 cents at
$3.254 per million British thermal units, after trading in a
narrow range between $3.207 and $3.267.
The front contract lost 0.9 percent last week following a
4.2 percent slide the week before. The contract is down about
4.8 percent in the last three sessions.
Chart watchers said the recent sell-off turned the
technicals neutral, leaving the nearby contract stuck in a
trading range between $3.20 and $3.50.
MDA Weather Services expects colder temperatures to move
into the Midwest and East next weekend, but the private
forecaster sees warmer readings returning to both regions in the
ANOTHER BELOW-AVERAGE STORAGE DRAW
U.S. Energy Information Administration data last week showed
total domestic gas inventories for the week ended Feb. 1 fell by
118 billion cubic feet to 2.684 trillion cubic feet.
Most traders viewed the report as bearish, noting the draw
came in well below the Reuters poll estimate of 132 bcf.
((Storage graphic: http://link.reuters.com/mup44s ))
While the withdrawal widened the deficit relative to last
year to 226 bcf, or 8 percent, it left storage relatively high
at 351 bcf, or 15 percent, above the five-year average for that
time of year.
Withdrawal estimates for Thursday's inventory report range
from 128 bcf to 180 bcf. Storage fell by 113 bcf during the same
week last year. The five-year average decline for the week is
If withdrawals for the rest of winter match the five-year
average, stocks will end March at 2.079 tcf, about 20 percent
above normal but 16 percent below last year, when inventories
finished a very mild heating season at a record high 2.48 tcf.
DRILLING DECLINES, PRODUCTION FAILS TO SLOW
Baker Hughes data on Friday showed the gas-directed
drilling rig count fell last week for the fourth time in five
weeks, dropping by three to 425.
But while the gas rig count is hovering not far above the
13-1/2 year low of 413, hit three months ago, production has
shown no significant signs of slowing.
((Rig graphic: http://r.reuters.com/dyb62s ))
Producers have curbed dry gas drilling, but the associated
gas produced by more profitable liquids-rich wells has kept gas
flowing at or near a record pace.
(Editing by John Wallace)
Keywords: MARKETS NYMEX/NATGAS
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