U.S. natgas futures edge higher ahead of weekly storage data

Thu Jan 24, 2013 9:32am EST
 
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* Front month well above recent 3-month spot low
    * Above-normal nuclear outages, near-term cold support
    * Record production could limit more gains
    * Coming up: EIA natgas storage data Thursday

    By Eileen Houlihan
    NEW YORK, Jan 24 (Reuters) - U.S. natural gas futures edged
higher early on Thursday after two straight losses, lifted by
expectations for another large inventory drawdown and continued
cold in the eastern half of the country.
    Traders and analysts expect weekly data from the U.S. Energy
Information Administration to show a draw of about 167 billion
cubic feet when it is released at 10:30 a.m. EST (1530 GMT), a
Reuters poll showed. 
    Stocks fell by 162 bcf in the same week last year, while the
five-year average decline for that week is 176 bcf.
    Most traders remained cautious ahead of the data, after
declines have exceeded industry expectations for the past three
weeks. Many said it reflects what could be some permanent
underlying growth in demand this year as utilities switch from
coal to cheaper gas for power generation.
    As of 9:20 a.m. EST (1420 GMT), front-month February natural
gas futures on the New York Mercantile Exchange were at
$3.57 per million British thermal units, up 1.6 cents, or less
than 1 percent.
    The front-month contract rose to a more than six-week high
of $3.645 on Tuesday, after falling in early January to $3.05, a
contract low and the lowest mark for a spot contract since late
September.
    Forecaster MDA Weather Services called for continued
below-normal temperatures for much of the East in its one- to
five-day forecast, switching to above-normal readings in the
six- to 10-day outlook for the eastern United States and some
below in the West.
    The latest National Weather Service six- to 10-day forecast 
issued on Wednesday showed normal temperatures for most of the
country, with above-normal readings across the South and
below-normal in the Midwest.
    Nuclear outages totaled 9,200 megawatts, or 9 percent of
U.S. capacity, down from 10,200 MW out on Wednesday, but up from
8,800 MW out a year ago and a five-year average outage rate of
about 7,000 MW. 
    
    ANOTHER BIG STORAGE DRAW, BUT STOCKS ABOVE AVERAGE
    Last week's EIA gas storage report showed inventories fell
the prior week by 148 bcf, above industry expectations for a
136-bcf draw. 
    But despite recent large withdrawals, storage remains at
3.168 trillion cubic feet, about 4 percent below year-earlier
levels, but more than 11 percent above the five-year average.

    Inventories started the heating season in early November at
3.929 tcf, the fourth straight year in which they have headed
into the heating season at a record peak.
        
    DRILLING RIG COUNT SLIDES, BUT OUTPUT NEAR RECORD
    Baker Hughes data last week showed the gas-directed rig
count had fallen by five to 429, its second straight weekly
loss. 
    Drilling for natural gas has mostly declined for more than a
year, with gas rigs down 54 percent since peaking at 936 in
October 2011.

    But the EIA also said recently that it expected gas output
in 2013 to rise to 69.84 bcf per day, the third straight annual
record.