US GAS: Futures End Lower On Ample Supplies, Weather Outlook

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HOUSTON (Dow Jones)--Natural-gas futures ended slightly lower Tuesday as ample supplies and a mild weather outlook weighed on prices, despite the anticipation of summer and a seasonal shift in demand.

Natural gas for June delivery on the New York Mercantile Exchange settled 3.9 cents, or 0.94%, lower at $4.131 million British thermal units. The front-month contract climbed to a high of $4.225/MMBtu in earlier, choppy trading.

Natural gas prices have lost about a third of their value since January as gas heating demand faded and producers ramped up drilling activity in prolific onshore natural gas fields known as shales. Traders, in turn, have bet heavily on falling prices as the market moves through a period known as its spring shoulder season, which is characterized by weak weather-related demand. However, prices have had difficulty moving below the $4 mark ahead of the summer cooling season, when gas demand for electricity generation to run air conditioners picks up.

Kent Bayazitoglu, an analyst with Houston-based Gelber & Associates, said that fear of hot weather and increased demand was helping support prices but the current weather outlook remains mild.

"The market is waiting for some weather," Bayazitoglu said.

Meteorologists with the private forecasting firm Commodity Weather Group are predicting a mixed weather outlook over the next few weeks that could stifle demand for gas.

"Active weather seems to literally dampen temperature extremes," the forecasters wrote Tuesday in a note to clients.

Analysts said high natural gas inventories were putting pressure on prices. Natural gas in U.S. storage for the week ended April 30 stood at 1.995 trillion cubic feet--5.1% higher than last year and 18.8% above the five-year average. That relative gas surplus can put pressure on prices by easing concerns over short-lived supply interruptions or demand spikes.

The U.S. Energy Information Administration said Tuesday that natural gas inventories will reach 3.8 trillion cubic feet by the end of the summer injection season, when natural gas supplies are replenished to meet winter heating demand. The agency doesn't expect the level of natural gas in storage to top the 2009 record of 3.837 trillion cubic feet, according to the EIA's Short-Term Energy Outlook.

"We continue to see the rising storage surplus as likely to keep a lid on nearby futures," Tim Evans, an analyst with Citi Futures Perspective, wrote in a note to clients.


FUTURES                                SETTLEMENT                           NET CHANGE
Nymex Jun                                     $4.131                                             -3.9c
Nymex Jul                                      $4.225                                             -4.6c
Nymex Aug                                    $4.311                                             -4.6c

CASH HUB                                  RANGE                                PREVIOUS DAY
Henry Hub                                   $4.14-$4.23                                   $4.05-$4.14
Transco 65                                   $4.16-$4.20                                   $4.07-$4.12
Tex East M3                                $4.49-$4.58                                    $4.44-$4.49
Transco Z6                                  $4.48-$4.55                                    $4.44-$4.48
SoCal                                          $3.97-$4.04                                    $3.91-$4.02
El Paso Perm                               $3.85-$3.93                                    $3.79-$3.92
El Paso SJ                                    $3.76-$3.84                                    $3.70-$3.77
Waha                                           $3.96-$4.01                                    $3.89-$4.05
Katy                                            $4.03-$4.12                                    $3.98-$4.04


-By Jason Womack, Dow Jones Newswires; 713-547-9201; jason.womack@dowjones.com


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