4 Min Read
* Mild weekend ahead but cold returns later next week * Nuclear outages still running above normal By Joe Silha NEW YORK, March 8 (Reuters) - U.S. natural gas futures ended higher on Friday for a second straight day, with the front-month contract powered to another six-week peak amid fairly chilly weather forecasts for next week that should stir more heating demand. Cold late-winter weather has helped push the front contract up more than 15 percent in the last three weeks, turning the chart picture more supportive as prices broke through some key moving-average and trendline resistance points. Traders also viewed Thursday's 146-billion-cubic-feet weekly inventory decline as bullish, noting it was the third straight week in which the draw came in above market expectations. But some expect further upside to be difficult with storage still high, production flowing at or near a record peak and milder spring weather likely soon to slow demand. "It's been pretty cold over the last month, but I think the upside is limited. There's not enough time left (in winter), and we're probably seeing the last round of heating demand," said Jonathan Lee at Ecova Inc in Washington. Front-month gas futures on the New York Mercantile Exchange ended up 4.7 cents, or 1.3 percent, at $3.629 per million British thermal units after climbing late to a six-week high of $3.635. For the week, the nearby contract gained 5 percent following a 5 percent rise last week. Many technical traders still need a close above the 2013 high of $3.645 to turn bullish. After a brief late-week warm-up, traders noted there was still some chilly weather in the extended forecast. MDA Weather Services, a private forecaster, noted that the six- to 10-day outlook had turned slightly colder overnight, particularly for the Midwest. Gas prices have also drawn support from more utilities using gas for baseload power this year and from sizeable nuclear plant outages that have prompted more gas burn. Gas-fired units are typically used to offset shut nuclear generation. ANOTHER ABOVE-AVERAGE STORAGE DRAW U.S. Energy Information Administration data on Thursday showed domestic gas inventories fell last week to 2.083 trillion cubic feet. While the weekly draw came in well above the five-year average drop for that week of 107 bcf and sliced 39 bcf from the surplus versus the five-year average, storage is still relatively high at 269 bcf, or 15 percent, above that benchmark. Early withdrawal estimates for next week's inventory report range from 88 bcf to 139 bcf. That would be well above the 66 bcf pulled from storage during the same week in 2012 and the five-year average decline for that week of 74 bcf. A string of strong weekly withdrawals has prompted analysts sharply to lower estimates for end-winter storage, with some expecting inventories to drop to as low as 1.8 tcf, or just about 4 percent above average. A Reuters poll in mid-January showed most analysts had expected stocks to finish the heating season at about 2 tcf. So far this winter, nearly 500 bcf more gas has been pulled from storage than last year at this time. RIGS DECLINE, OUTPUT SLOWING LITTLE Baker Hughes data on Friday showed the gas-directed drilling rig count fell 13 this week to a nearly 14-year low of 407. It was the fifth drop in six weeks, but production has not slowed much, if at all, from the record high posted last year. The EIA expects marketed gas production in 2013 to hit a record high for the third straight year.