UPDATE 3-U.S. natgas futures end lower after hitting 3-month high

Tue Mar 12, 2013 3:13pm EDT
 
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* Front month hits highest mark since early December
    * Nuclear outages running above normal
    * Some milder weather on tap in long-term outlooks


    By Eileen Houlihan
    NEW YORK, March 12 (Reuters) - U.S. natural gas futures
ended lower on Tuesday, pressured by some profit-taking after
technical buying boosted the front contract to its loftiest mark
in just over three months.
    Traders said some milder weather forecast for this week and
next, still high storage and near-record production also weighed
on prices after three straight gains.
    Recent coldness had pushed the nearby contract up about 17
percent from the five-week low of $3.125 per million British
thermal units hit in mid-February.
    The run up turned the chart picture more supportive and
helped prices break through some key technical resistance.
    But front-month April natural gas futures on the New York
Mercantile Exchange closed lower Tuesday, losing 0.4 cent
to finish at $3.645 per mmBtu.
    The nearby contract rose as high as $3.676 in electronic
trade, its highest price since early December, according to
Reuters data.
    Other months ended slightly lower as well, with the May
contract down 0.5 cent at $3.684 and summer months losing
about 1 cent each.
    In the cash market, gas for Wednesday delivery at the NYMEX
benchmark Henry Hub in Louisiana rose 7 cents to
$3.71, its highest level since late November.
    Late deals firmed to 7 cents over the front month, from
deals done late Monday at a 5-cent premium.
    Gas on the Transco pipeline at the New York citygate gained 12 cents to $4.
    Forecaster MDA Weather Services called for warm conditions
in the western United States in its one- to five-day outlook,
with some below-normal temperatures lingering in the East.
    The latest National Weather Service six- to 10-day forecast
issued on Monday also called for below-normal temperatures in
the West and above-normal for much of the East.
    Nuclear outages totaled about 16,500 megawatts, or 16
percent of U.S. capacity, down from 16,700 MW out on Monday and
19,500 MW out a year ago, but up from a five-year average outage
rate of about 15,500 MW. 
    
    ANOTHER ABOVE-AVERAGE STORAGE DRAW
    U.S. Energy Information Administration data last week showed
domestic gas inventories fell the prior week by 146 billion
cubic feet to 2.083 trillion cubic feet. 
    Most traders viewed the decline as bullish for prices,
noting it was the third straight week in which the draw came in
above expectations. A Reuters poll showed traders and analysts
had forecast a 134-bcf drop.
    The draw was also well above the 92-bcf pull seen during the
same week last year and the five-year average drop of 107 bcf
for that week.    
    Storage is now 361 bcf, or 15 percent, below last year's
record highs for this time of year, but it is also 269 bcf, or
15 percent, above the five-year average.
       
    Early withdrawal estimates for this week's inventory report
range from 88 bcf to 147 bcf, well above the 66 bcf pulled from
storage during the same week in 2012 and the five-year average
decline of 74 bcf for that week.
    A string of strong weekly withdrawals has prompted analysts
to lower estimates sharply for end-winter storage, with some
expecting inventories to drop to as low as 1.8 tcf, or 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.
    
    RIGS DECLINE; OUTPUT SLOWING LITTLE
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell 13 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.
        
    While the EIA on Tuesday lowered its growth forecast for
2013, it still expects marketed gas production to hit a record
high for the third straight year.