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