By Joe Silha
NEW YORK, Jan 9 (Reuters) - Front-month U.S. natural gas
futures lost ground on Wednesday for a third straight day, as
fairly mild near-term weather forecasts and bearish government
data on production this week continued to pressure the complex.
Despite expectations for a supportive weekly inventory
report on Thursday - a Reuters poll on Wednesday put the
withdrawal estimate well above last year and the five-year
average - many traders expect prices to remain on the defensive
with storage and production still at or near record highs.
'The weather recently has not been as harsh as expected, and
we also haven't seen any retrenchment (pullback) in production,'
said Steve Platt, an analyst at Archer Financial in Chicago.
Without much colder weather to force homeowners and
businesses to turn up their heaters, traders said any upside in
prices will be difficult.
While mild weather covering the eastern half of the nation
this week is expected to taper off next week, Commodity Weather
Group noted the outlook for the six- to 15-day period has been
trending warmer with weaker cooling potential.
The private forecaster's 11- to 15-day map now shows
seasonal readings for most of the country, with cold only
expected across northern tier states.
At 12:10 p.m. EST (1710 GMT), front-month gas futures
on the New York Mercantile Exchange were down 10.7 cents, or 3.3
percent, at $3.111 per million British thermal units after
trading between $3.102 and $3.227.
The front contract, which hit a three-month low of $3.05
last Wednesday, lost 5.2 percent last week. So far this week the
contract is down another 5.4 percent as milder weather moved
across the country and slowed demand for heating.
The technical, or chart picture, has also been tilting
against the bulls. Gas prices over the last week dropped below
the 100-day moving average and the intermediate trendline dating
back to the 10-year low of $1.902 hit in April.
While the market is oversold and there should be some
psychological buying at the $3 level, better support may lie at
the 200-day moving average near $2.93.
Traders said gas prices could pick up support from nuclear
plant outages, which are running at about 8,500 megawatts this
week, or 2,800 MW above average for this time of year.
Gas-fired plants are typically used to offset any lost
nuclear generation, but traders said the milder temperatures
ahead were likely to lessen the need for replacement power.
While gas inventories are likely to drop below year-ago
levels in Thursday's Energy Information Administration report,
total stocks will still be running at more than 10 percent above
the five-year average, a comfortable cushion to meet any
unexpected spikes in winter demand or disruptions in supply.
(Storage graphic: http://link.reuters.com/mut84t )
A Reuters poll on Wednesday showed that traders and analysts
expected stocks to have fallen by 186 billion cubic feet last
week. Storage dropped by 95 bcf at about the same time last
year, while the five-year average decline for that week is about
EIA data last week showed that gas inventories for the week
ended Dec. 28 stood at 3.517 trillion cubic feet, still a record
high for that time of year.
GAS DRILLING GAINS, PRODUCTION STILL NEAR RECORD
Drilling for natural gas has fallen some 53 percent since
peaking in 2011 at 936 in October, but so far production has not
shown any signs of slowing.
(Rig graphic: http://r.reuters.com/dyb62s)
EIA data on Monday showed that gross U.S. gas production in
October climbed to 73.54 bcf per day, the second straight
Then on Tuesday, the agency said it expected marketed
natural gas production in 2013 to rise nearly 1 percent to an
average of 69.84 bcf daily, which would be the third straight
year of record output.
(Reporting By Joe Silha; Editing by Bob Burgdorfer)
Keywords: MARKETS NYMEX/NATGAS
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