NEW YORK: US natural gas futures shrugged off pressure from fairly mild weather forecasts for the eastern half of the nation and ended higher on Tuesday on support from a potential storm in the Gulf of Mexico and technical buying after last week's steep slide.
"The (tropical) disturbance in the Gulf (of Mexico) may be providing a little support today, but the temperature forecasts look neutral to a little bearish," said Jonathan Lee at Ecova Inc in Spokane, Washington.
Chart traders also said the market was due for a bounce after dropping 6 percent last week, its biggest weekly tumble in nearly six months.
But they noted that preliminary volume estimates were light at just about 200,000 contracts, reflecting uncertainty about the market's next move. Daily trading has averaged more than 300,000 lots in the last 30 days.
The US National Hurricane Center said a low pressure system in the central Gulf of Mexico had a 40 percent chance of becoming a tropical cyclone as it drifts northward toward the US Gulf coast.
While the system should not significantly affect offshore oil and gas production, traders said it served as a reminder that the hurricane season is under way. The weather system could turn into a bearish event if it dumps cooling rains across the South.
Front-month gas futures on the New York Mercantile Exchange ended up 0.7 cent at $3.998 per million British thermal units after trading between $3.965 and $4.033.
Traders noted the March-April backwardation traded at nearly a three-month low of 16.1 cents on Tuesday, reflecting growing concerns that recent strong storage builds will leave inventories flush heading into next heating season.
That spread is down more than 60 percent since peaking this year at 41.3 cents in mid-April after a cold winter whittled down record high supplies and stirred expectations that stocks would be a lot tighter next winter.
While Texas is expected to turn hotter in the next two weeks, Commodity Weather Group said the overall big picture was one of reduced demand compared with recent years.
The private forecaster expects seasonal or below-seasonal temperatures to continue for the eastern half of the nation for the next two weeks, with some heat moving from the West into the South Central United States during the period.
COMFORTABLE STORAGE, PRODUCTION
Injection estimates for Thursday's Energy Information Administration storage report range from 80 billion to 101 billion cubic feet, with most in the low-90s.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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