NEW YORK, Sept 16 (Reuters) - Front-month U.S. natural gas
futures ended higher on Thursday for a fifth straight day as a
late flurry of short covering offset an early sell-off
triggered by government data showing a larger-than-expected
weekly inventory build.
U.S. natural gas inventories climbed last week by 103 billion cubic feet to 3.267 trillion cubic feet, U.S. Energy Information Administration data showed on Thursday.
It was the largest weekly storage build since late May and expanded the surplus to the five-year average for the first time in 13 weeks.
Front-month gas slid 14.3 cents to a low of $3.852 right after the early EIA data, then climbed late to a four-week high of $4.144 before settling at $4.062, up 6.7 cents. The nearby contract is up 8 percent in the last five sessions.
Spreads to winter months continued to narrow, with January gaining just 1.9 cents to $4.605. The October-January spread has lost 28 percent in the last five sessions, dropping from more than a 75-cent carry to about 54 cents.
Estimated volume was heavy at about 404,425 contracts, the highest since trading a record 455,794 lots on Aug. 9.
'The market shorted the (EIA build) number, but once the downside stalled, shorts started to cover and we came back,' a New York-based trader said.
Analysts had forecast a weekly inventory build in the 90 bcf area. Last year at this time stocks rose 67 bcf, while the five-year average increase for that week was 77 bcf.
The EIA report showed the storage deficit to year-ago slid by 36 bcf to 182 bcf, or 5 percent, while the surplus to the five-year average grew by 26 bcf to 192 bcf, still a 6 percent cushion to help rebuild stocks for next winter. (Graphic: http://link.reuters.com/hut82k )
Record heat and power demand this summer slowed storage builds by about 16 percent from June through August, with the three-month injection total of about 740 bcf well below the five-year average of about 880 bcf for the period.
Early injection estimates for next week's storage report range from 75 bcf to 107 bcf, versus a 66-bcf build for the same week last year and a five-year average gain of 70 bcf.
OTHER FUNDAMENTALS
While steady storage buying, utility fuel switching and lingering heat in Texas and the South have helped underpin cash and nearby futures this month, many traders remained skeptical of the upside without a storm to disrupt Gulf Coast gas output.
They note moderating autumn temperatures have been slowing demand, while still high inventories and near record high production were keeping supplies very comfortable.
AccuWeather.com expects temperatures in the Northeast and Midwest, key gas consuming regions, to range from near normal to slightly above for the next week, with highs in the low- to mid-70s Fahrenheit. Texas readings were expected to average a few degrees above normal, with highs in the low- to mid-90s F.
Strong production this year has been a major roadblock to tightening a loose supply-demand balance, but traders said relatively low spot prices could finally slow drilling as profit margins get squeezed and prompt some utilities to switch from coal to cheaper gas to generate power.
Last summer, gas demand picked up as much as 3 billion cubic feet a day after a steep price drop led to switching.
TECHNICALS, CASH
While gas prices often bottom in late summer or early fall, then climb ahead of the winter heating season, some chart traders said it was still too early to call a bottom.
But some said Thursday's front month close above $4, the first in more than three weeks, could set the stage for more upside, noting funds were still heavily short and could be forced to cover if prices climb a little higher.
Above $4, front-month resistance was pegged at $4.15, the
38.2 percent Fibonacci retracement of the August sell
off, and then at mid-August highs in the $4.375 area and at $4.50.
Support was seen at $3.70 and then at the 11-month spot low of $3.62 and at $3.50.
The NYMEX 12-month Henry Hub strip edged up 0.7 cent to finish at $4.489. Henry Hub futures open interest on Sept. 15 rose 3,785 contracts to 825,501.
Henry Hub cash prices climbed 3 cents to a three-week high of $4.09, with late morning deals firming to 11 cents over NYMEX from 5 cents over on Wednesday. Transco prices at the New York City gate slipped 5 cents to $4.34 on the mild Friday outlook. Chicago edged up a penny to $4.13.
(Reporting by Joe Silha; Editing by David Gregorio) Keywords: MARKETS NYMEX/NATGAS (joe.silha@thomsonreuters.com; +1 646 223 6071 Reuters Messaging; joe.silha.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
U.S. natural gas inventories climbed last week by 103 billion cubic feet to 3.267 trillion cubic feet, U.S. Energy Information Administration data showed on Thursday.
It was the largest weekly storage build since late May and expanded the surplus to the five-year average for the first time in 13 weeks.
Front-month gas slid 14.3 cents to a low of $3.852 right after the early EIA data, then climbed late to a four-week high of $4.144 before settling at $4.062, up 6.7 cents. The nearby contract is up 8 percent in the last five sessions.
Spreads to winter months continued to narrow, with January gaining just 1.9 cents to $4.605. The October-January spread has lost 28 percent in the last five sessions, dropping from more than a 75-cent carry to about 54 cents.
Estimated volume was heavy at about 404,425 contracts, the highest since trading a record 455,794 lots on Aug. 9.
'The market shorted the (EIA build) number, but once the downside stalled, shorts started to cover and we came back,' a New York-based trader said.
Analysts had forecast a weekly inventory build in the 90 bcf area. Last year at this time stocks rose 67 bcf, while the five-year average increase for that week was 77 bcf.
The EIA report showed the storage deficit to year-ago slid by 36 bcf to 182 bcf, or 5 percent, while the surplus to the five-year average grew by 26 bcf to 192 bcf, still a 6 percent cushion to help rebuild stocks for next winter. (Graphic: http://link.reuters.com/hut82k )
Record heat and power demand this summer slowed storage builds by about 16 percent from June through August, with the three-month injection total of about 740 bcf well below the five-year average of about 880 bcf for the period.
Early injection estimates for next week's storage report range from 75 bcf to 107 bcf, versus a 66-bcf build for the same week last year and a five-year average gain of 70 bcf.
OTHER FUNDAMENTALS
While steady storage buying, utility fuel switching and lingering heat in Texas and the South have helped underpin cash and nearby futures this month, many traders remained skeptical of the upside without a storm to disrupt Gulf Coast gas output.
They note moderating autumn temperatures have been slowing demand, while still high inventories and near record high production were keeping supplies very comfortable.
AccuWeather.com expects temperatures in the Northeast and Midwest, key gas consuming regions, to range from near normal to slightly above for the next week, with highs in the low- to mid-70s Fahrenheit. Texas readings were expected to average a few degrees above normal, with highs in the low- to mid-90s F.
Strong production this year has been a major roadblock to tightening a loose supply-demand balance, but traders said relatively low spot prices could finally slow drilling as profit margins get squeezed and prompt some utilities to switch from coal to cheaper gas to generate power.
Last summer, gas demand picked up as much as 3 billion cubic feet a day after a steep price drop led to switching.
TECHNICALS, CASH
While gas prices often bottom in late summer or early fall, then climb ahead of the winter heating season, some chart traders said it was still too early to call a bottom.
But some said Thursday's front month close above $4, the first in more than three weeks, could set the stage for more upside, noting funds were still heavily short and could be forced to cover if prices climb a little higher.
Above $4, front-month resistance was pegged at $4.15, the
38.2 percent Fibonacci retracement of the August sell
off, and then at mid-August highs in the $4.375 area and at $4.50.
Support was seen at $3.70 and then at the 11-month spot low of $3.62 and at $3.50.
The NYMEX 12-month Henry Hub strip edged up 0.7 cent to finish at $4.489. Henry Hub futures open interest on Sept. 15 rose 3,785 contracts to 825,501.
Henry Hub cash prices climbed 3 cents to a three-week high of $4.09, with late morning deals firming to 11 cents over NYMEX from 5 cents over on Wednesday. Transco prices at the New York City gate slipped 5 cents to $4.34 on the mild Friday outlook. Chicago edged up a penny to $4.13.
(Reporting by Joe Silha; Editing by David Gregorio) Keywords: MARKETS NYMEX/NATGAS (joe.silha@thomsonreuters.com; +1 646 223 6071 Reuters Messaging; joe.silha.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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