U.S. natgas futures edge higher for 5th day, below 17-mth high

Tue Mar 19, 2013 9:47am EDT
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* Front month below Monday's highest level since Oct. 2011
    * Nuclear outages still running above normal
    * Cold weather remains on tap in long-term outlooks

    By Eileen Houlihan
    NEW YORK, March 19 (Reuters) - U.S. natural gas futures
edged higher early on Tuesday, extending gains for a fifth
straight session but remaining just under Monday's 17-month spot
chart high.
    Lingering cold weather in consuming regions of the nation, a
string of supportive weekly storage withdrawals and above-normal
nuclear power plant outages have combined to lift nearby gas
futures up about 25 percent in just over a month.
    The contract broke through several key resistance levels on
its run up from a five-week low of $3.125 per million British
thermal units hit in mid-February, and was accompanied by steady
gains in open interest, a bullish sign indicating that new
buying and not short covering has been fueling the upside.
    Futures-only open interest hit a record high of 1,316,945
contracts on Friday, eclipsing the previous high of 1,308,114
from April 2012. 
    But some traders caution that the impending end of winter
could provide resistance to higher prices.
    As of 9:31 a.m. EDT (1331 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.904 per mmBtu, up 2.2 cents, or less than 1 percent.
    The front-month rose to $3.965 on Monday, the highest mark
for a spot contract since October 2011, according to Reuters
    Forecaster MDA Weather Services called for widespread cold
across most of the country in its one to five-day outlook.
    The latest National Weather Service six to 10-day forecast
issued on Monday called for below or much-below-normal
temperatures for a little more than the eastern half of the
nation, with normal readings in the West.
    Nuclear outages totaled 21,000 megawatts, or 21 percent of
U.S. capacity, up from 20,500 MW out on Monday and a five-year
average outage rate of about 17,200 MW, but down from 21,700 MW
out a year ago. 
    U.S. Energy Information Administration data last week showed
storage fell 145 billion cubic feet the prior week, more than
Reuters poll expectations for a 134 bcf draw, the year-ago drop
of 66 bcf, and the five-year average decline for that week of 74
    It was the fourth straight larger-than-expected drawdown
from inventories.
    The data showed domestic gas inventories are now at 1.938
trillion cubic feet, nearly 19 percent below last year's record
high levels for this time of year, but about 11 percent above
the five-year average level. 

    The string of strong weekly withdrawals has prompted
analysts to sharply lower estimates for end-winter storage, with
some expecting inventories to drop 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.
    Early withdrawal estimates for this week's EIA storage
report range from 62 bcf to 73 bcf, versus a flat year-ago week
and a five-year average withdrawal of 26 bcf for that week.
    Baker Hughes data last week showed the gas-directed
drilling rig count rose by 24, the largest number in over three
years, lifted from the prior week's 14-year low to 431.

    But while the EIA last week lowered its growth forecast for
2013, it still expects marketed gas production to hit a record
high for the third straight year.