NEW YORK: Front-month US natural gas futures ended down sharply on Thursday in active trade, pressured by a government report showing a weekly inventory build well above market expectations.
The US Energy Information Administration report showed total domestic gas inventories rose last week by 111 billion cubic feet to 2.252 trillion cubic feet.
Traders viewed the build as bearish for prices, noting it came in above the highest Reuters poll estimate of 110 bcf and above the five-year average increase for that week of 92 bcf.
"People were looking for a big injection, but it was bigger than most expected, and it drove the selling. Technically, I think we did some damage today, and there's probably room to go lower," said Tom Saal, senior vice president at INTL FCStone.
Front-month gas futures on the New York Mercantile Exchange ended down 17.4 cents, or 4.3 percent, at $3.827 per million British thermal units after sliding late to $3.824, nearly a three-month low.
The March-April backwardation lost 2.5 cents to 13.6 cents, its lowest in nearly three months as strong storage builds stir concerns that stocks will be flush heading into next winter.
Prices over the last week had been stuck trading on either side of $4 and volume faded, posting a 2013 low of 184,724 lots on Tuesday amid uncertainty about the market's next move.
It was the biggest one-day selloff for the front contract in five weeks and easily broke through important technical support in the $3.90 area.
Volume spiked sharply, more than doubling Tuesday's low to over 400,000 lots based on preliminary estimates.
Chart traders said today's weak close could set up a test of the 100-day moving average at about $3.80, with a break of that level possibly leading to a move to the next support at about $3.50.
Many traders had been skeptical of the upside without a broader-based heatwave to stir demand, noting supplies were very comfortable and moderating temperatures this month were likely to translate into lower air conditioning load.
Even a tropical storm in the Gulf of Mexico, the Atlantic hurricane season's first, named Andrea, was not enough to drive prices up much this week. The National Hurricane Center expects Andrea, to reach the Florida coast later Thursday, then move up the East Coast over the weekend.
While Texas is still expected to turn hot in the six- to 15-day time frame, private forecaster Commodity Weather Group still expects temperatures for the eastern half of the nation to remain near seasonal levels for the next 10 days.
Traders said they expected storage builds to remain fairly strong in coming weeks as moderate temperatures give homeowners and businesses a break on their air conditioning bills.
(Storage graphic: http://link.reuters.com/mup44s)
Inventories now stand at 616 bcf, or 21 percent below last year's record highs at the time and 69 bcf, or 3 percent below the five-year average.
Early injection estimates for next week's report range from 83 to 107 bcf versus a 66-bcf build during the same week last year and a five-year average rise for that week of 84 bcf.
Traders are waiting for the next Baker Hughes drilling rig report on Friday after last week's data showed the gas rig count was still hovering just above an 18-year low.
US production in 2013 has not slowed much, if at all, from last year's record.
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