US natural gas futures ended with slim gains on Friday, backed by short-covering ahead of the weekend following a steep slide on Thursday. "We probably saw a little short covering ahead of the weekend. Some people are expecting temperatures to creep back up later next week," said Steve Mosley at The SMC Report in Arkansas, adding warmer forecasts next week could rally prices.
Front-month gas futures on the New York Mercantile Exchange ended up 0.1 cent at $3.828 per million British thermal units after slipping overnight to a three-month low of $3.814. It was the fourth gain for the front month in the last five sessions, but for the week, the contract lost 3.9 percent. That followed a 6 percent fall the previous week.
Prices tanked 4.3 percent on Thursday after the US Energy Information Administration reported that gas inventories climbed last week by a larger-than-expected 111 billion 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.
Technical traders said Thursday's weak close below important support at about $3.90 likely turned the chart picture negative and could soon lead to a break below next support at the 100-day moving average in the $3.80 area. The season's first tropical storm, Andrea, was moving up the East Coast on Friday, dumping heavy rain along the way that should slow air conditioning needs.
Southern California Edison on Friday said it would permanently retire two units at the San Onofre nuclear plant. The shutdown of about 2,150 megawatts of nuclear generating capacity in California has the potential to add 400 million cubic feet to daily gas demand.
Many traders had been sceptical of the upside without a broader-based heatwave to stir demand, noting supplies were very comfortable and moderate temperatures this month were likely to translate into lower air conditioning load. While Texas was still expected to heat up in the six- to 15-day time frame, private forecaster Commodity Weather Group still expected temperatures for most of 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. 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. Baker Hughes data on Friday showed the gas drilling rig count held steady for a fourth straight week at 354, just above the 18-year low of 350 hit in early May.
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