Isra-Mart srl: NYMEX-Natural gas ends up 1.5 pct, forecasts turn colder

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U.S. natural gas futures ended higher on Tuesday, backed by colder extended weather forecasts for the Northeast and Midwest that should stir more heating
demand despite concerns about an oversupplied market.
NYMEX front-month gas NGc1, which expires on Thursday, climbed 5.4 cents, or 1.5 percent, to settle at $3.658 per million British thermal units after trading between $3.581 and $3.70.
The November-January spread widened slightly, with the premium for January at 31.9 cents, up from Monday's six-week low of 31.6 cents. That spread is down 38 percent since peaking 2-1/2 weeks ago at an 11-month high of 51.9 cents, "The market's been hammered, but we're coming into winter, so there's support here. No one wants to bet short heading into the heating season, but if the cold doesn't happen next month, prices could be in trouble," a Massachusetts trader said.
He noted front-month prices have been moving up since hitting an 11-1/2-month low of $3.446 two weeks ago.
Traders have mostly shrugged off Rina, which strengthened into a Category Two hurricane on Tuesday and was located in the western Caribbean. Most computer models show the system steering northeast, towards southern Florida.
The U.S. National Hurricane Center gave another system,located in the eastern Caribbean, a 20 percent chance of becoming a tropical cyclone in the next 48 hours.
Despite the colder late-week outlook which could prop up prices, traders said recent big inventory builds and record high domestic gas production were likely to limit any price gains in the near term.
WEATHER, OTHER FUNDAMENTALS
Most traders expect any upside in prices to be difficult to sustain until more persistent cold forces homeowners and businesses to crank up their burners.
After a mild start to the week, AccuWeather.com expects temperatures in the Northeast and Midwest, key gas-consuming regions, to cool to below normal late this week and next week.
Heating demand in both regions should pick up later in the week as overnight lows, at times, dip into the 30s and low-40s degrees Fahrenheit area.
Most traders expect another above-average inventory build when the U.S. Energy Information Administration releases its next weekly storage report on Thursday.
Injection estimates range from 62 billion to 93 billion cubic feet, with most near 80 bcf. Stocks rose an adjusted 74 bcf during the same week last year, while the five-year average increase for that week is 47 bcf.
EIA data last week showed that gas in storage climbed to 3.624 trillion cubic feet last week, 46 bcf, or 1.3 percent, below the same year-ago week but 113 bcf, or 3.2 percent, above the five-year average.
Several triple-digit inventory builds over the last month have forced analysts to raise estimates of where inventories will peak this year. Most now expect storage to climb to near 3.8 tcf, or just shy of last year's record high of 3.84 tcf,
before winter withdrawals begin.
Record high gas production, primarily from shale, has dampened price expectations this year despite strong weather demand during a cold winter and a very hot summer.
The EIA expects marketed gas output this year to climb by more than 4 bcf per day to a record high 65.99 bcf daily, eclipsing the previous high of 62.05 bcf from 1973.
Drilling data on Friday from Baker Hughes offered little hope that production would slow down any time soon, with the rig count at 927 still well above 800, a level some analysts say is needed to cut output and tighten supplies.

While gas burns during winter on average run about 50 percent, or 30 bcf per day, higher than summer and could help tighten an oversupplied market, many traders question whether even a cold winter would be enough to soak up excess supply.
Storage will begin the heating season just below record highs. With production running 3 bcf per day or more above last year, that could mean an additional 450 bcf of winter supply.
Traders note that most forecasters expect winter to be colder than normal but not as cold as last winter when about 2.26 tcf of gas was pulled from inventory.
Some say stocks could end the heating season at a record high near 1.9 tcf and keep prices on the defensive next year.