3 Min Read
* Front month remains above last week's 3-month spot low * Long-term outlooks start to call for colder weather * Cold should make for more big storage draws By Eileen Houlihan NEW YORK, Jan 7 (Reuters) - U.S. natural gas futures rose nearly 2 percent early on Monday, a second straight session of gains as long-term weather outlooks began to call for some colder weather for late this month and for early February, traders said. Last week's larger-than-expected drawdown from winter inventories also kept momentum to the upside, despite some near-term milder weather that should curb heating demand in consuming regions of the nation. As of 9:18 a.m. EST (1418 GMT), front-month February gas futures on the New York Mercantile Exchange were at $3.344 per million British thermal units, up 5.7 cents, or just under 2 percent. The front-month contract fell to $3.05 last week, a contract low and the lowest mark for a spot contract since late September. The latest National Weather Service six-to-10-day forecast issued on Sunday again called for above-normal temperatures for about the eastern third of the United States, but below or much-below-normal readings for the rest of the country. Private forecaster MDA Weather Services called for below-normal readings for nearly the entire country in its 11 to 15-day outlook. Nuclear outages totaled 8,900 megawatts, or 9 percent, of U.S. capacity, up from about 7,500 MW out on Friday, 5,400 MW out a year ago and a five-year average outage rate of about 5,200 MW. BIG WINTER DRAWDOWN BUT STORAGE STILL BLOATED Last week's gas storage report from the U. S. Energy Information Administration showed gas inventories fell the prior week by 135 billion cubic feet, above industry expectations for a 127 bcf draw. But despite the big draw, storage remains at 3.517 trillion cubic feet, nearly 1 percent above year-ago levels and more than 12 percent above the five-year average level. Inventories started the heating season in early November at a record high 3.929 tcf, the fourth straight year that inventories have headed into the heating season at an all-time peak. Early withdrawal estimates for this week's EIA report range from 155 bcf to 176 bcf versus a 137-bcf decline during the same year-ago week and a five-year average draw for that week of about 165 bcf. RIGS GAIN, OUTPUT STILL NEAR RECORD Baker Hughes data on Friday showed the gas-directed rig count rose by eight to 439, its third straight weekly gain. But drilling for natural gas has mostly declined for more than a year, with gas rigs down 53 percent since peaking at 936 in October 2011. The gas rig count is hovering above a 13-1/2-year low of 413 hit eight weeks ago, but so far production has not shown any significant sign of slowing. The EIA expects gas output in 2013 to rise to a record high of 69.59 bcf per day, the third straight annual record.