US natural gas futures ended up sharply on Friday, backed by a late flood of buying ahead of the weekend despite fairly neutral weather forecasts that are not likely to stir up much demand. Gas prices sold off sharply on Thursday, sinking more than 3 percent after a bearish weekly inventory report.
Chart traders said technical buying may have propped up prices on Friday, noting futures seem to have found a bottom after testing and holding technical support in the $3.90 per mmBtu area several times over the last week or so. "The weather is still a little bearish, but we managed a net gain for the week. It looks like we hit some buy stops when prices broke the $4 mark," said Steve Mosley at The SMC Report. Front-month gas futures on the New York Mercantile Exchange ended up 12.3 cents at $4.055 per million British thermal units after trading between $3.915 and $4.096. For the week, the front contract gained 3.7 percent, its first weekly rise in four weeks. Traders said buying was focused more up front, noting the June-January carry narrowed for the first time in three days, slipping 1.3 cents to 39.7 cents. So far this year, that spread has traded between 32.6 and 59.2 cents.
But despite the uptick, many traders remain sceptical of the firmer trend, at least until more heat arrives to force homeowners and businesses to crank up air conditioners. In its six- to 10-day outlook, Commodity Weather Group said it expected near seasonal temperatures for the Midwest, East and South, with heat building in the Midwest after that period.
Most traders viewed Thursday's 99 billion cubic feet weekly inventory build as bearish, noting it came in above the Reuters poll estimate of 95 bcf and well above the five-year average increase for that week of 83 bcf. The US Energy Information Administration report showed that total domestic gas inventories climbed last week to 1.964 trillion cubic feet, about 26 percent below last year's record highs at that time and 4 percent below the five-year average storage level for that week. Early injection estimates for next week's report range from 87 to 100 bcf versus a 75-bcf build during the same week last year and a five-year average rise for that week of 90 bcf.
Baker Hughes data Friday showed the gas-directed rig count climbed this week by four to 354 after posting an 18-year low last week. Despite a steep decline in dry gas drilling over the last year and a half, production has not slowed much, if at all. EIA still expects output in 2013 to post a record high for a third straight year.