U.S. natgas futures edge higher early on colder forecasts
* Front month remains well above recent three-month low * Cold weather back in consuming regions this week * Cold on tap for West next week * Nuclear outages running well above normal By Eileen Houlihan NEW YORK, Feb 20 (Reuters) - U.S. natural gas futures edged higher early on Wednesday, rising for a second straight day amid continued cold weather in consuming regions of the nation. In addition, forecasts for more cold in the West next week and nuclear power plant outages that remain well above normal were keeping momentum to the upside. But some traders expect bloated inventories and the impending end of winter to add some weight to the downside. As of 9:06 a.m. EST (1406 GMT), front-month March natural gas futures on the New York Mercantile Exchange were at $3.30 per million British thermal units, up 2.8 cents, or less than 1 percent. The front month contract rose nearly 4 percent on Tuesday, recovering all of last week's losses. The contract hit a 6-1/2 week high of $3.645 in late January after touching a more than a three-month low of $3.05 early in the month. Forecaster MDA Weather Services called for mostly below-normal readings across the nation in its one to five-day outlook. MDA's six to 10-day forecast, and the latest National Weather Service six to 10-day forecast issued on Tuesday, called for below-normal temperatures across the West and mostly normal readings in the East. Nuclear outages totaled about 15,100 megawatts, or 15 percent of U.S. capacity, down slightly from 15,300 MW out on Tuesday but up from 13,900 MW out a year ago and a five-year average outage rate of about 10,100 MW. ANOTHER BELOW-AVERAGE STORAGE DRAW Last week's gas storage report from the U.S. Energy Information Administration showed total domestic inventories fell in the prior week by 157 billion cubic feet to 2.527 trillion cubic feet. Most traders viewed the report as bearish, noting the draw came in below Reuters poll estimates for a 162 bcf drop and was under market expectations for a third straight week. While stocks are nearly 10 percent below last year's record levels, they are 16 percent above the five-year average level for this time of year. Early withdrawal estimates for Thursday's weekly inventory report so far range from 118 bcf to 126 bcf, below the 155 bcf pulled from storage during the same week in 2012 and the five-year average decline for that week of 140 bcf. If drawdowns for the rest of winter match the five-year average pace, inventories will end March at 2.076 tcf, about 20 percent above normal but 16 percent below last year, when stocks finished a very mild heating season at a record high 2.48 tcf. DRILLING DECLINES, PRODUCTION FAILS TO SLOW Baker Hughes data last week showed the gas drilling rig count fell for the fifth time in six weeks, dropping by four to 421. But while the gas rig count is hovering not far above the 13-1/2 year low of 413 reported 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.
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