By Joe Silha
NEW YORK, April 23 (Reuters) - Front-month U.S. natural gas
futures ended lower on Tuesday for a second straight day as
investors focused on forecasts for milder weather next week that
should finally slow heating demand and shrugged off some chilly
weather this week.
Traders said lingering cold and prospects for light storage
builds this month have supported prices, but after nine straight
weeks of gains some see the upside stalling, at least until
hotter weather kicks up air conditioning demand.
Cold late-winter weather, a chilly spring and above-average
nuclear plant outages put a huge dent in record gas inventories
and helped drive prices up 40 percent since mid-February.
'Winter showed up late this year and the market doesn't want
to pull back much. We're going to get light (storage) injections
this week and next week, but it looks like the forecasts are
finally calling for spring,' a Texas-based trader said.
Front-month gas futures on the New York Mercantile
Exchange ended down 2.9 cents at $4.238 per million British
thermal units after trading between $4.218 and $4.319. The front
contract, which has lost nearly 4 percent in the last two
sessions, hit a 21-month high of $4.429 last Thursday.
Traders noted that gas prices have climbed to levels that
could dampen demand by making gas less competitive with coal for
power generation. High prices could also tempt producers to turn
on more wells, increasing supply.
Record growth in futures open interest that has accompanied
recent price gains has also raised concerns investors with long
positions may rush to take profits when moderating spring
temperatures finally slow space heating needs.
After the cold shot this week, Commodity Weather Group noted
that computer models mainly show seasonal to warm anomalies for
the six- to 15-day outlook. But the forecaster added 'Since it
is early May, we would need to see stronger anomalies to
generate a (cooling) demand response.'
ANOTHER LIGHT INVENTORY BUILD EXPECTED
U.S. Energy Information Administration data last week showed
total domestic gas inventories rose by 31 billion cubic feet to
1.704 trillion cubic feet.
(Storage graphic: http://link.reuters.com/mup44s)
Most traders viewed the build as supportive for prices,
noting it came in below the Reuters poll estimate of 34 bcf and
below the five-year average increase for that week of 39 bcf.
The season's first injection, which came about three weeks
later than usual, widened the storage deficit relative to the
five-year average by 8 bcf, leaving stocks at 74 bcf, or 4
percent, below that benchmark.
Chilly weather this month is expected to continue to slow
inventory builds and drive stocks further below average for the
next couple of weeks.
Injection estimates for Thursday's EIA report range from 19
to 48 bcf, with most in the mid-30s. Stocks rose 43-bcf during
the same week in 2012, while the five-year average build for
that week is 50 bcf.
OUTPUT NOT SLOWING MUCH YET
Baker Hughes data on Friday showed the gas-directed
rig count rose slightly last week for the second straight week,
stirring expectations that higher gas prices may be tempting
producers to hook up more wells.
(Rig graphic: http://link.reuters.com/nuz86t )
While the gas rig count is hovering just above a 14-year low
of 375 posted two weeks ago, production so far has not slowed
much from the record high hit last year.
(Additional reporting by Eileen Houlihan; Editing by Sofina
Mirza-Reid and Jim Marshall)
Keywords: MARKETS NYMEX/NATGAS
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