UPDATE 1-Cold drives front U.S. natgas futures up for 4th day
* Cold trend expected to continue through middle of March * High inventories, record production limit upside * Coming up: Reuters natural gas storage poll Wednesday NEW YORK, Feb 27 (Reuters) - Front U.S. natural gas futures held gains on Wednesday for a fourth straight session, backed by expectations that chilly weather for much of the country over the next two weeks will force homeowners and businesses to crank up their heaters. "There is more cold coming, but we're running out of time for winter," a Texas-based trader said. The front contract rallied 5.6 percent in the prior three sessions, its biggest three-day run up in six weeks, but traders said gas remained cheap enough to draw demand from some utilities switching from higher-priced coal to generate power. In addition, they noted that hefty nuclear plant outages this week, at more than 16,000 megawatts, were boosting demand for gas. Gas-fired units are typically used to offset shut nuclear generation. At 10:00 a.m. EST (1500 GMT), front-month gas futures on the New York Mercantile Exchange were up 5.2 cents, or 1.5 percent, at $3.508 per million British thermal units, after climbing during the morning to a five-week high of $3.511. Early cash quotes for Thursday delivery at Henry Hub , the benchmark supply point in Louisiana, gained 2 cents to $3.48 on very light volume of 166 million cubic feet. The Hub posted an eight-week high of $3.63 a month ago. Early Hub differentials weakened slightly to about 4 cents over NYMEX, from a 6-cent premium on Tuesday. Next-day prices on the Transco pipeline at the New York citygate rose for the first time in five sessions, climbing 7 cents to $3.85 on the colder outlook for later this week and early next week. Technical traders noted the nearby contract gapped higher this week and on Wednesday traded above the next resistance point at the 100-day moving average in the $3.46 area. Most agreed a strong close above $3.50 could set the stage for a test of this year's high of $3.645 hit in late January. Commodity Weather Group, a forecaster, noted the outlook through mid-March still favored a cold-prevailing pattern, particularly for the Midwest, which should translate into decent heating demand as winter winds down. But even if March turns out cold, most traders see only limited upside potential for prices, with gas inventories still high, production flowing at or near an all-time peak and milder spring weather likely just a few weeks away. ABOVE-AVERAGE STORAGE DRAW EXPECTED U.S. Energy Information Administration data last week showed domestic gas inventories of 2.400 trillion cubic feet were 9 percent below last year's record high at that time, but were still relatively large at 361 billion cubic feet, or 18 percent, above the five-year average. Withdrawal estimates for Thursday's inventory report range from 140 bcf to 177 bcf, with most in the mid-160s. Stocks fell by an adjusted 106 bcf during the same week last year. The five-year average decline for that week is 118 bcf. Most analysts expect storage to end the heating season at just over 2 tcf, about 16 percent above average but 17 percent below last winter's record-high finish of 2.48 tcf.
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