NEW YORK: US natural gas futures ended lower on Thursday, pressured by technical selling after three straight gains and a slightly bearish weekly inventory report despite fairly hot weather forecasts for northern tier states that should stir more demand.
The US Energy Information Administration reported that total domestic gas inventories rose last week by 91 billion cubic feet to 2.438 trillion cubic feet.
While traders noted the weekly build was in line with the Reuters poll estimate of 90 bcf, some pegged it as bearish, coming in well above the five-year average for that week of 80 bcf. Mild late spring weather has driven injections above that benchmark for three straight weeks.
"The (EIA) number came in above last year and the five-year average and was just bearish enough to send the bulls to the sidelines, but we're coming into more summer-like weather, so I don't see too much downside," said Jonathan Lee at Ecova Inc in Spokane, Washington.
Front-month gas futures on the New York Mercantile Exchange ended down 8.6 cents, or 2.2 percent, at $3.877 per million British thermal units after sinking to an intraday low of $3.835 right after the EIA report.
The gas price slide last week to a three-month low of $3.71 came close to making gas competitive with coal for power generation. But the steep drop in Central Appalachian coal prices this week to an eight-month low of about $55 per short ton kept coal as the fuel of choice for electric utilities.
Warmer weather forecasts for the Northeast and Midwest helped drive the front contract up 6.2 percent in the previous three sessions, but many traders remained skeptical of the upside with inventories comfortable and gas production flowing at or near a record high.
MDA Weather Services still expects a broad area of above-normal to much-above-normal temperatures to stretch across the northern half of the United States in its six- to 10-day outlook. But the forecaster noted that readings turn cooler from the Midwest to East and South in the 11- to 15-day period.
The weekly inventory build trimmed the deficit relative to last year by 28 bcf to 559 bcf, or about 20 percent below last year's record highs at that time. It also cut 11 bcf from the shortfall versus the five-year average, leaving stocks just 47 bcf, or 2 percent, below that benchmark.
Early injection estimates for next week's report range from 75 bcf to 95 bcf, versus a 58-bcf build during the same week last year and a five-year average rise for that week of 79 bcf.
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