U.S. natgas futures lower in profit taking from 17-mth high

Wed Mar 20, 2013 9:40am EDT
 
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* Front month hits highest level since October 2011
    * Nuclear outages still running above normal
    * Cold weather remains on tap in long-term outlooks

    By Eileen Houlihan
    NEW YORK, March 20 (Reuters) - U.S. natural gas futures
edged lower early on Wednesday, down for the first time in six
sessions in some profit taking after the nearby contract rose to
a 17-month spot chart high.
    Lingering cold weather in consuming regions of the United
States, a string of supportive weekly storage withdrawals and
above-normal nuclear power plant outages have combined to lift
nearby gas futures up 27 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.
    But some chart traders said the contract was overbought and
due for a pullback with winter winding down and the 14-day
relative strength index climbing into the high-80s this week,
its highest in several years according to Reuters data.
    As of 9:30 a.m. EDT (1330 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.923 per mmBtu, down 4.6 cents, or about 1 percent, after
trading as high as $3.976, the highest mark for a spot contract
since late October 2011.
    Forecaster MDA Weather Services called for below, much-below
or strong-below normal readings for nearly the entire nation
except the South in its one to five-day outlook.
    The latest National Weather Service six to 10-day forecast
issued on Tuesday again called for below or much-below-normal
temperatures for a little more than the eastern half of the
nation and along the West Coast, with some normal readings in
other parts of the West.
    Nuclear outages totaled 21,700 megawatts, or 22 percent of
U.S. capacity, up from 21,000 MW out on Tuesday, 20,900 MW out a
year ago and a five-year average outage rate of about 17,100 MW.
 
    
    ANOTHER ABOVE-AVERAGE STORAGE DRAW
    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
bcf. 
    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 61 bcf to 74 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.