U.S. natgas futures edge higher amid tighter supply

Tue Apr 23, 2013 9:36am EDT
 
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* Front month still below last week's 21-month chart high
    * Above-normal temperatures back on tap in most forecasts
    * Nuclear power plant outages still above average

    By Eileen Houlihan
    NEW YORK, April 23 (Reuters) - U.S. natural gas futures
edged higher early on Tuesday, consolidating after Monday's more
than 4-percent slide, as traders weighed a tightening supply
picture against falling seasonal demand.
    "Weather forecasts are little changed from yesterday, with
below to well-below-normal temperatures expected across the
country in the next five-days, followed by a shift warmer at the
 end of this month and the early part of May," noted Addison
Armstrong, senior director of market research at Tradition
Energy in Stamford, Connecticut.
    The milder weather should finally start to curb heating
demand prior to the onset of cooling demand season, but before
its arrival still cold weather is expected to slow storage
injections.
    Lingering cold in consuming regions, ongoing spring power
plant outages and a tightening supply picture all helped lift
nearby gas futures to their highest level in nearly 21 months
last week.
    Gas futures are still up about 37 percent since
mid-February, after cold and lingering winter weather put a huge
dent in inventories.
    As of 9:15 a.m. EDT (1315 GMT), front-month May natural gas
futures on the New York Mercantile Exchange were at
$4.283 per million British thermal units, up 1.6 cents, or less
than 1 percent.
    The contract rose to $4.429 last week, the highest level for
a nearby contact since late July 2011.
    The latest National Weather Service six to 10-day forecast
issued on Monday called for above-normal temperatures for most
of the West and a large portion of the East Coast, with normal
or below-normal readings along the Gulf Coast and in the
mid-Continent.
    Nuclear outages totaled 24,400 megawatts, or 24 percent of
U.S. capacity, down from 25,800 MW out on Monday and 24,700 MW
out a year ago, but up from a five-year average outage rate of
23,900 MW. 
    
    INJECTION SEASON OFF TO SLOW START
    Last week's gas storage report from the U.S. Energy
Information Administration showed domestic inventories rose the
prior week by 31 billion cubic feet, below Reuters poll
estimates for a 34 bcf build and the five-year average gain of
39 bcf for that week. 
    Stocks, at 1.704 trillion cubic feet, are nearly 32 percent
below last year and more than 4 percent below the five-year
average.

    Inventories started the heating season at record highs, but
three weeks ago slid below the five-year norm for the first time
since September 2011.
    Early injection estimates for this week's report range from
19 to 48 bcf versus a 43-bcf build during the same week last
year and a five-year average rise for that week of 50 bcf.
    Injections during the April-through-October stock building
season on average total about 2 tcf, meaning stocks could head
into next winter with about 3.7 tcf in the ground, well above
what would be needed to meet even the coldest winter demand, but
nearly 6 percent below last year's record peak of 3.929 tcf.
    Baker Hughes gas drilling rig data last week showed
the gas-directed rig count rose two to 379, after hitting a
14-year low of 375 three weeks ago.