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Natural gas futures paused Thursday ahead of a closely watched survey of U.S. gas inventories, already at their highest level ever for this time of year.
Natural gas for June delivery recently fell 1 cent, or 0.4%, to $2.455 a million British thermal units on the New York Mercantile Exchange.
Futures were little changed as traders awaited the 10:30 a.m. EDT data from the Energy Information Administration. Analysts surveyed by Dow Jones Newswires are calling for a smaller-than-average inventory increase of 32 billion cubic feet during the week ended May 4.
Relatively modest additions to U.S. gas inventories in recent weeks--combined with long-awaited production cuts and increased demand from power plants--have helped spur a sharp rally in natural gas over the last month.
Prompt-month futures have surged 29% off the 10-1/2-year low of $1.907/MMBtu reached April 19.
But the rally has left some traders wondering if prices have risen too quickly. Despite recent cuts, production remains near record highs and inventories are well above normal levels.
"We've seen the recent run, but I think it's going to be short lived," said Tariq Zahir, head trader at the commodities fund Tyche Capital, adding that any additional production cuts would help send futures higher still.
Chesapeake Energy Corp. (CHK), Devon Energy (DVN), Exxon Mobil (XOM) and others have announced output reductions in recent weeks, helping to shore up prices.
Still, the cuts have done little to address the massive inventory overhang that has left some traders and analysts worried that natural gas stockpiles could reach capacity later this year. If the inventory build comes in as expected, U.S. gas stockpiles will stand at 2.608 trillion cubic feet, a record high for this time of year, 45% above the five-year average and 44% above last year's level for the same week.
Natural gas for next-day delivery at the benchmark Henry Hub in Louisiana recently traded at $2.36/MMBtu, according to IntercontinentalExchange, compared with Wednesday's average of $2.3602 /MMBtu. Natural gas for next-day delivery at Transcontinental Zone 6 in New York traded at $2.45/MMBtu, down from $2.4560/MMBtu.
-By Dan Strumpf, Dow Jones Newswires; 212-416-2818; firstname.lastname@example.org.