US natural gas futures ended slightly higher on Friday after some early selling, driven by short covering after three straight losing sessions and ahead of colder weather next week that should increase gas used for heating. The front contract, which posted a 7.7 percent gain last week in its biggest one-week run up in nearly a year, ended the week down 0.3 percent, lightly pressured by profit taking after recent gains and milder weather this week that curbed demand.
"We pulled back over the last couple of days, so we probably got some short covering ahead of the weekend. The weather forecasts for next week also look bullish and we've got two gas storage reports next week," said Steve Mosley at The SMC Report. The US Energy Information Administration did not release its weekly natural gas storage report on Thursday due to the government shutdown, which ended on Wednesday. The agency plans to release inventory data for the weeks ended October 11 and October 18 on Tuesday and Thursday, respectively.
Front-month gas futures on the New York Mercantile Exchange ended up 0.7 cents at $3.764 per million British thermal units, after trading between $3.685 and $3.785. The nearby contract hit a four-month high of $3.869 Wednesday. Traders noted prices were pressured early today by concerns that a cold snap expected next week could be short-lived. Commodity Weather Group noted colder changes for the Midwest, South and East next week, with some below freezing temperatures expected for the Midwest and lows in the 30s Fahrenheit for some East Coast cities. But the forecaster also expects warmer adjustments late in the 11-to-15-day outlook. With winter fast approaching, some traders said prices could still move up if the early cold sticks around.
But others remain skeptical of the upside, noting inventories have already climbed to comfortable levels and production was still flowwing at or near a record high Traders and analysts polled by Reuters expect an increase of 80 billion cubic feet when the EIA on Tuesday releases weekly inventory data for the week ended October 11. That would be well above the 54 bcf build in the same week last year and the five-year average increase for that week of 75 bcf.
Last week's report showed total US gas stockpiles stood at 3.577 trillion cubic feet, 3.7 percent below the year-earlier record highs but 1.6 percent above the norm for that week. Stocks data for the week ended October 18 will be issued on Thursday at the normal time of 10:30 am. Early injection estimates for that report range from 75 bcf to 88 bcf, above both the 64 bcf build posted last year at that time and the five-year average gain for that week of 67 bcf. Baker Hughes data on Friday showed the gas drilling rig count rose this week for the second time in three weeks, increasing by three to 372.
The count has risen in 10 of the last 17 weeks, stirring talk that new pipelines and processing plants may be encouraging producers to pump more gas into an already well-supplied market. The EIA last week also raised its estimate for domestic gas production in 2013, expecting average output this year to post a record high for the third straight year.
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