U.S. natgas futures hover near 18-month high on lingering cold

Fri Mar 22, 2013 9:28am EDT
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* Front month near $4 level, highest since September 2011
    * Nuclear outages still running above normal
    * Cold weather on tap in long-term forecasts
    * Coming Up: Baker Hughes gas drilling rig data on Friday

    By Eileen Houlihan
    NEW YORK, March 22 (Reuters) - U.S. natural gas futures rose
1 percent early on Friday, boosted to just under Thursday's
18-month spot chart high as cold weather lingered in most of the
United States.
    An extremely cold late winter, a string of supportive
storage withdrawals and above-normal nuclear power plant outages
have combined to lift nearby gas futures by about 28 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 was fueling the upside.
    But with winter weather expected to end soon, and this
week's storage withdrawal coming in below expectations, some
traders view the upside as limited.
    As of 9:19 a.m. EDT (1319 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.999 per mmBtu, up 6.4 cents, or more than 1 percent, after
trading as high as $4.025 on Thursday, the highest mark for a
spot contract since September 2011.
    Forecaster MDA Weather Services called for below, much-below
or strong-below normal readings for nearly the entire country,
except parts of the South, in its one to five-day outlook.
    The latest National Weather Service six to 10-day forecast
issued on Thursday again called for below or much-below-normal
temperatures for a more than the eastern half of the nation and
along the West Coast, with some normal readings only in other
parts of the West.
    Nuclear outages totaled 21,400 megawatts, or 21 percent of
U.S. capacity, down from 22,600 MW out on Thursday, but up from
21,200 MW out a year ago and a five-year average outage rate of
about 17,700 MW. 
    U.S. Energy Information Administration data on Thursday
showed total domestic gas inventories fell last week by 62
billion cubic feet, below Reuters poll estimates for a 70 bcf
    The EIA said reclassification of gas from base gas to
working gas last week resulted in a 4 bcf increase in working
gas stocks in Producing Region salt dome facilities. 
    Most traders viewed the decline as bearish for prices,
noting it was the first time in five weeks that the draw fell
short of expectations.
    But some saw the report as supportive again, noting stocks
were unchanged during the same week in 2012 and the five-year
average decline for that week was 26 bcf.
    Domestic gas inventories are now at 1.876 trillion cubic
feet, more than 21 percent below last year's record high levels
for this time of year, but about 10 percent above the five-year
average level.

    Stocks seem on track to end the heating season below 1.8
tcf, or just 3 percent above average. A Reuters poll in
mid-January showed most analysts had expected stocks to finish
winter at about 2 tcf.
    Early withdrawal estimates for next week's inventory report
range from 59 bcf to 94 bcf versus a 45-bcf build during the
same week last year and a five-year average increase for that
week of 6 bcf.
    Traders were waiting for the next Baker Hughes gas
drilling rig report to be released later Friday. Data last week
showed the gas-directed rig count rose by 24, the largest number
in over three years, lifted from the prior week's 14-year low to

    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.