U.S. natgas futures rise early ahead of more cold weather

Wed Feb 13, 2013 9:33am EST
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* Front month remains above recent 3-month low
    * Colder weather set to return late-week, next week
    * Nuclear outages running well above normal levels
    * Coming Up: EIA natgas storage data Thursday

    By Eileen Houlihan
    NEW YORK, Feb 13 (Reuters) - U.S. natural gas futures edged
higher early on Wednesday, with prospects for increased heating
demand from cold weather forecast to move back into consuming
regions of the nation late this week and next.
    In addition, above-normal nuclear power plant outages and
expectations for a large weekly inventory draw on Thursday were
keeping momentum to the upside, despite still bloated storage
and record high production.
     As of 9:23 a.m. EST (1423 GMT), front-month March natural
gas futures on the New York Mercantile Exchange were at
$3.263 per million British thermal units, up 3.3 cents, or just
over 1 percent.
    The front month contract hit a 6-1/2 week high of $3.645 in
late January after touching more than a three-month low of $3.05
in early January. 
    Forecaster MDA Weather Services called for warm conditions
early but cold weather late in the Midwest in its one to
five-day outlook.
    In its six to 10-day forecast, as well as the latest
National Weather Service six to 10-day forecast issued on
Tuesday, both called for normal or below-normal temperatures for
most of the nation.
    Nuclear outages totaled 13,200 megawatts, or 13 percent of
U.S. capacity, up from 13,100 MW out on Tuesday, 10,900 MW out a
year ago and a five-year average outage rate of about 8,400 MW.
    Last week's gas storage report from the U.S. Energy
Information Administration showed total domestic inventories
fell the prior week by 118 billion cubic feet to 2.684 trillion
cubic feet. 
    Most traders viewed the report as bearish, noting the draw
came in well below Reuters poll estimates for a 132 bcf drop.

    While stocks are now 8 percent below last year's record
levels, they are 15 percent above the five-year average level
for this time of year.
    Withdrawal estimates for Thursday's weekly inventory report
so far range from 130 bcf to 180 bcf versus a year-ago drop of
113 bcf and a five-year average decline for that week of 154
    If withdrawals for the rest of winter match the five-year
average, stocks will end March at 2.079 tcf, about 20 percent
above normal, but 16 percent below last year, when inventories
finished a very mild heating season at a record high 2.48 tcf.
    Baker Hughes data last week showed the gas-directed
drilling rig count fell for the fourth time in five weeks,
dropping by three to 425. 
    But while the gas rig count is hovering not far above the 
13-1/2-year low of 413 hit three months ago, production has
shown no significant sign of slowing.

    Producers have curbed dry gas drilling but the associated
gas produced by more profitable liquids-rich wells has kept gas
flowing at or near a record pace.