NEW YORK: Front US natural gas futures, shrugging off milder weather forecasts for next week, ended higher on Thursday for the first time in five sessions, backed by a government report showing a larger-than-expected inventory withdrawal for last week.
A US Energy Information Administration report showed total domestic gas inventories fell last week by 94 billion cubic feet to 1.687 trillion cubic feet.
Most traders viewed the decline as neutral or supportive for prices, noting stocks usually build slightly that week and that the draw came in above market expectations. Traders and analysts polled by Reuters had expected a 91-bcf draw.
It was the first time since September 2011 that gas inventories dropped below the five-year average, a supportive sign particularly with another draw expected next week.
Front-month gas futures on the New York Mercantile Exchange ended up 4.7 cents, or 1.2 percent, at $3.947 per million British thermal units. The contract hit an intraday high of $3.976 right after the EIA data at 10:30 a.m. EDT, then slid to the day's low of $3.861.
"It was a slightly bullish (EIA) number, and next week we should see another withdrawal which should keep aggressive sellers on the sideline, but once we get some (milder) shoulder month weather, we should see lower prices," said Tom Saal, senior vice president at INTL FCStone in Miami.
Cold late-winter temperatures and above-average nuclear plant outages have helped put a huge dent in inventories and drive futures prices up nearly 30 percent since mid-February.
The front contract posted a 19-month high of $4.121 just last week. But despite chilly weather this week, many traders expect milder spring temperatures to soon slow demand and bring out the sellers, noting production was still flowing at robust levels and there was plenty of new length in the market.
Recent price gains have been accompanied by a steady climb in futures open interest which hit record highs in 13 straight sessions, signaling that new longs, not shorts covering positions, were fueling much of the upside.
But some chart traders worry that milder temperatures and slower demand could trigger a stampede by those longs looking to quickly take profits and cash out.
While the Plains and part of the Midwest could remain cold next week, MDA Weather Services expects above- to much-above-normal temperatures to stretch from Texas to the Northeast in its 11- to-15-day outlook.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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