Bargain-hunting buoys U.S. natgas futures after recent slide minutes ago by Thomson Reuters
* Front month hits five-week low, then bounces * Spring weather finally arrives in much of the country * EIA sees 2013 gas output up 1 pct from 2012 record high * Coming up: EIA, Enerdata natural gas storage data Thursday By Joe Silha NEW YORK, May 8 (Reuters) - U.S. natural gas futures heldgains on Wednesday, propped up by buyers looking for bargainsahead of Thursday's inventory report following a 3 percent slidein the previous two sessions on slowing demand as moderatingspring weather continued. While some traders said the market was oversold and due fora bounce, many remained concerned about recent government datashowing speculative investors were holding record high net longpositions, which could lead to a sharp sell-off as demand tapersoff and new length rushes to cash out. Moderating temperatures have been making previously bullishtraders nervous following a cold winter and chilly spring thatwhittled down record high storage and drove gas prices up morethan 40 percent from mid-February lows. "There is some support here and maybe a little buying aheadof the number (EIA storage report), but the weather is going towork against the market. I don't see a lot of load ahead," saidSteve Platt, analyst at Archer Financial in Chicago. At 1:10 p.m. EDT (1710 GMT), front-month gas futures on the New York Mercantile Exchange were up 3.9 cents, or 1percent, at $3.959 per million British thermal units aftersliding overnight to a five-week low of $3.895. The upside started to stall a couple of weeks back, with thefront contract losing ground after nine straight weeks of gains. After breaching minor support at the 20-day and 40-daymoving averages over the last week, chart traders notedTuesday's weak close broke support in the $3.94 area, which wasthe 38.2 percent Fibonacci retracement of the move up from theFebruary low of $3.125 to last week's 21-month high of $4.444. Expectations for a string of above-average weekly storagebuilds as temperatures moderate have started to weigh on prices.Last Thursday's unexpectedly-large inventory build triggered a7-percent selloff, the biggest one-day drop in nine months. While there are still below-normal temperatures in theforecast, particularly for Texas and the Southeast, tradersnoted normal highs are on the rise as summer approaches andbelow-normal readings in May are not likely to trigger muchheating or cooling load. Some traders expect gas prices to remain under pressure, atleast until homeowners and businesses crank up air conditioners. After a brief cold push early next week, Commodity WeatherGroup expects mostly seasonal temperatures to dominate theMidwest, East and South over the 11- to 15-day time frame. ANOTHER BIG INVENTORY BUILD EXPECTED Last week's storage build was only the third injection ofthe stock building season, but it did exceed market expectationsand prices fell sharply immediately after the report. Traders and analysts polled by Reuters are looking for anabove average storage build when the U.S. Energy InformationAdministration releases weekly inventory data on Thursday, withmost expecting a gain of 83 billion cubic feet. Stocks rose 30 bcf during the same week last year, while thefive-year average increase for that week is 69 bcf. EIA data last week showed that total domestic gasinventories had climbed to 1.777 trillion cubic feet, about 118bcf, or 6 percent, below the five-year average. PRODUCTION CLIMBS DESPITE FEWER RIGS The Baker Hughes gas drilling rig count has fallento an 18-year low, but so far production has not slowed much, ifat all, from the record high hit last year. The EIA on Tuesday raised its estimate for domestic naturalgas production in 2013, expecting output this year to be upabout 1 percent from 2012's levels. If realized, it would be thethird straight year of record production.