U.S. natgas futures edge lower; milder weather to curb demand

Tue Apr 2, 2013 9:36am EDT
 
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* Front month below last week's 19-month spot high
    * Above-normal temperatures on tap for much of nation
    * Nuclear outages also above normal levels

    By Eileen Houlihan
    NEW YORK, April 2 (Reuters) - U.S. natural gas futures edged
lower early on Tuesday, with milder weather on tap for consuming
regions of the nation later this week expected to curb heating
demand.
    But some traders said above-normal nuclear power plant
outages could continue to support near-term demand for gas-fired
generation.
    Late-winter cold put a huge dent in inventories and has
driven gas prices up nearly 30 percent since mid-February, but
with winter-like weather expected to wind down soon, most
traders expect the upside to be limited.
    As of 9:20 a.m. EDT (1320 GMT), front-month May natural gas
futures on the New York Mercantile Exchange were at
$3.978 per million British thermal units, down 3.7 cents, or
about 1 percent, after rising to $4.121 last week, the highest
level for a nearby contact since September 2011.
    Despite some early-week cold in consuming regions in the
Northeast and Midwest, the latest National Weather Service
six-to-10-day forecast issued on Monday called for above-normal
readings for about the eastern half of the nation and in some
Northwest states. Below-normal readings were only expected in
parts of the Southwest.
    Nuclear outages totaled 23,400 megawatts, or 23 percent of
U.S. capacity, up from 22,900 MW out a year ago and a five-year
average outage rate of 20,700 MW. 
    
    INVENTORY DRAW WELL ABOVE EXPECTATIONS
    Last week's gas storage report from the U.S. Energy
Information Administration showed domestic gas inventories fell
from the prior week by 95 billion cubic feet, above Reuters poll
estimates for an 87 bcf draw. 
    It was the fifth time in six weeks that the weekly
withdrawal was above expectations.
    Domestic gas inventories are now at 1.781 trillion cubic
feet, nearly 27 percent below last year's record high, but still
nearly 4 percent above the five-year average.

    Early estimates for this week's EIA gas storage report range
from 45 bcf to 97 bcf versus a 43 bcf build during the same week
last year and a five-year average increase for that week of 4
bcf.
    Stocks began the winter at a record 3.929 tcf, but about
2.15 tcf of gas has been pulled from storage so far this heating
season, or 45 percent more than last year at this time.
    Storage will probably end the heating season near the 1.73
tcf average, or 30 percent below last winter's record-high
finish of 2.48 tcf. A Reuters poll in mid-January showed most
analysts expected stocks to finish the winter at about 2 tcf.
    EIA data released Friday showed that gross natural gas
production in January fell nearly 1 percent from December
levels, the second straight monthly decline.
    Output also dropped below year-ago levels for the first time
in years, but it is still unclear whether recent monthly
declines were due to well freeze-offs from the cold or
producers' curbing dry gas flows because prices were not that
attractive.
    Baker Hughes data last week showed the gas-directed
drilling rig count fell by 29 to a 14-year low of 389.