By Joe Silha
NEW YORK, April 24 (Reuters) - U.S. natural gas futures fell
on Wednesday for a third straight session, with the front month
testing near-term support as milder weather forecasts and
technical selling drove prices down further from recent highs.
Cold late-winter weather, a chilly spring and above-average
nuclear plant outages put a huge dent in record gas inventories,
helping drive prices up 40 percent since mid-February.
But despite lingering cold and prospects for light storage
builds for the next two weeks, some see the upside for gas
futures stalling after nine straight weeks of gains,
particularly with milder weather on the horizon.
'This is a bit of consolidation or profit taking after the
recent run up, especially with the weather transitioning. It
looks like we're testing trendline support today,' said Matt
Smith, commodity analyst at Schneider Electric in Kentucky.
At 1:15 p.m. EDT (1715 GMT), front-month gas futures
on the New York Mercantile Exchange were down 5.8 cents, or 1.4
percent, at $4.18 per million British thermal units after
trading between $4.162 and $4.276.
The front contract is down about 5 percent in the last three
sessions after hitting a 21-month high of $4.429 on Thursday.
Smith noted the up trendline, drawn off the mid-February low
of $3.125, came in at about $4.18 on Tuesday. He said a close
below that level was likely to set up a test of better support
in the $4.13 area, the 20-day spot moving average and the 23.6
Fibonacci retracement of the move up to last week's peak.
Smith pegged major support in the $3.93 area, another
Fibonacci measure and the front-month high from last year. A
close below that level could trigger a lot more selling.
Chart watchers have also expressed concerns that the record
growth in futures open interest that accompanied recent price
gains could lead to a sharp sell-off if investors with long
positions rush to take profits as milder weather slows demand.
After the cold shot this week, MDA Weather Services expects
temperatures through the first week of May to range from
seasonal to above seasonal for most of the eastern half of the
nation, with below normal readings only in Gulf Coast states.
ANOTHER LIGHT INVENTORY BUILD EXPECTED
Traders and analysts polled by Reuters are looking for a 32
billion cubic feet build when the U.S. Energy Information
Administration releases its weekly inventory report on Thursday.
Stocks rose 43-bcf during the same week last year, while the
five-year average build for that week is 50 bcf.
It would only be the second injection of the stock building
season, which started about three weeks later than usual this
year due to chilly spring weather.
EIA data last week showed total domestic gas inventories had
climbed to 1.704 trillion cubic feet, 32 percent below last
year's record highs at that time and 4 percent below the
(Storage graphic: http://link.reuters.com/mup44s)
Chilly weather this month is expected to slow inventory
builds in at least the next two reports and drive stocks further
into deficit relative to the five-year average.
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, if at all, from the record high hit last year.
(Editing by Mauren Bavdek; Editing by David Gregorio)
Keywords: MARKETS NYMEX/NATGAS
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