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U.S. natgas futures end down, finish week up 1.5 pct

Source: Reuters - Fri, 20 Dec 2013 09:04 PM
Author: Reuters
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(New throughout, adds analyst quote, updates futures and cash prices)

NEW YORK, Dec 20 (Reuters) - U.S. natural gas futures, lightly pressured by profit taking ahead of a mild weekend, settled slightly lower on Friday, but colder weather forecasts for later next week that should stir more heating demand helped limit the downside.

The front-month contract, which shot up 5 percent Thursday after U.S. Energy Information Administration data showed natural gas stocks fell last week by a record amount, finished the week up 1.5 percent, its seventh straight weekly gain.

Since Nov. 1, front futures have spiked some 25 percent, blowing through some key technical resistance along the way. Chilly weather over the last two months which triggered an unexpected surge in heating demand helped back the gains.

"The weather moderates for a few days, then turns cold again, and technically, the weekly chart is going to look good after seven straight gains," said Tom Saal, senior vice president at INTL FCStone in Miami.

"We could see more technical buying next week and a test of the high."

Front-month gas futures on the New York Mercantile Exchange ended down 4.2 cents, or 0.9 percent, at $4.418 per million British thermal units after climbing overnight to $4.492, its highest since July, 2011.

Private forecaster MDA Weather Services said temperatures will change from a warm weekend in the East to much colder weather over much of the country from Dec. 25 to Jan. 3.

Gas inventories peaked this year in early November at 3.834 trillion cubic feet, just 2 percent below last year's record highs at that time. Last week, total domestic gas inventories slid 285 billion cubic feet to 3.248 trillion cubic feet, 488 bcf, or 13 percent, below last year.

The draw, which came in well above the Reuters poll estimate of 258 bcf, easily eclipsed the previous record of 274 bcf set in January 2008.

The early chill has triggered stock draws that were more than double the norm for that period and prompted analysts to scale back end-winter storage estimates.

Next week's report is likely to show another above-average drawdown, with early estimates ranging from 135 bcf to 177 bcf, versus a 74 bcf drop during the same week a year ago and a 125 bcf five-year average decline for the week.

If drawdowns for the rest of the heating season match the five-year average, storage would end winter below 1.5 tcf, the lowest since 2008.

Traders noted the premium of the March 2014 gas futures over the April contract this week shot up more than 50 percent to 27.8 cents, its widest in eight months. Gains in winter months have outpaced spring contracts as the cold start to winter lowered analyst expectations for end-winter inventories.

In the ICE cash market, prices for weekend delivery at Henry Hub <GT-HH-IDX>, the benchmark supply point in Louisiana, climbed 9 cents to $4.35, with late differentials weakening to 12 cents under NYMEX from an 8-cent discount on Thursday.

Gas on the Transco pipeline at the New York citygate <E-TSCO6NY-IDX> slid 55 cents to $3.48 on the mild weekend outlook. Chicago <MC-CHICIT-IDX> was 23 cents higher at $4.75.

For daily ICE U.S. cash gas prices, click <0#GAS-IDX=ICE>. (Reporting by Scott DiSavino, Eileen Houlihan and Julia Edwards; Editing by Steve Orlofsky, Bernadette Baum and Chris Reese)

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