U.S. natgas futures edge higher after six straight losses
* New front month contract remains above recent 3-month low * Colder weather set to return to Midwest this week * Above-normal nuclear outages lend some support By Eileen Houlihan NEW YORK, Jan 30 (Reuters) - U.S. natural gas futures edged higher early Wednesday, rising for the first time in seven sessions ahead of colder weather expected to make a return to Midwest consuming regions later this week. But with milder weather on tap for extended weather outlooks, and above-normal inventory levels, most traders expect limited upside. As of 9:16 a.m. EST (1416 GMT), new front-month March natural gas futures on the New York Mercantile Exchange, were at $3.284 per million British thermal units, up 2.6 cents, or just under 1 percent. The February contract went off the board on Tuesday down 6.3 cents, or nearly 2 percent, after sliding more than 9 percent in the past six sessions, the biggest six-day slide in nearly seven weeks. The former front month hit a 6-1/2-week high of $3.645 early last week and a more than three-month low of $3.05 in early January. Forecaster MDA Weather Services said cold would return to the Midwest in the one to five-day outlook, but a shift to above-normal or far-above-normal temperatures were expected for much of the country in the six to 10-day outlook. The latest National Weather Service six to 10-day forecast issued on Tuesday also called for above-normal readings for most of the nation with near-normal temperatures along both coasts. Nuclear outages totaled 7,100 megawatts, or 7 percent of U.S. capacity, down from 7,700 MW out on Tuesday and 9,800 MW a year ago, but up from a five-year average outage rate of about 6,300 MW. BIG STORAGE DRAWS FAIL TO FIRM PRICES Last week's gas storage report from the U.S. Energy Information Administration showed domestic gas inventories fell in the prior week by 172 billion cubic feet, above industry expectations for a 167 bcf draw. Most traders viewed the decline as supportive, noting it was the fourth straight week that declines topped industry expectations. Traders said the recent larger-than-expected inventory draws could be reflecting new growth in gas use this year as utilities switch from coal to cheaper gas for power generation. But despite the large withdrawals, storage remains at 2.996 trillion cubic feet, about 5 percent below year-earlier levels, but 12 percent above the five-year average. Early withdrawal estimates for Thursday's weekly inventory report range from 197 bcf to 221 bcf, well above the 149 bcf drawn from inventory during the same week last year and the five-year average decline of 178 bcf for that week. If drawdowns for the rest of the winter match the five-year average, inventories will end March at 2.048 tcf, about 18 percent above normal but 17 percent below last year, when stocks finished a very mild heating season at a record-high 2.48 tcf. GAS RIG COUNT GAINS, FIRST TIME IN THREE WEEKS Baker Hughes data last week showed the gas-directed drilling rig count gained for the first time in three weeks, rising by five to 434. Drilling for natural gas has mostly been in decline for more than a year, with the rig count not far above the 13-1/2-year low of 413 posted in early November. But so far production has shown no significant sign of slowing. The EIA estimates that gas output in 2013 will hit a record high for the third straight year.
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