U.S. natgas futures lower ahead of weekend, slip under $4/mmBtu

Fri May 3, 2013 9:34am EDT
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* Front month well below Wednesday's 21-month high
    * Weather outlooks remain mixed for May
    * Nuclear power plant outages still below normal
    * Coming Up: Baker Hughes gas drilling rig data Friday

    By Eileen Houlihan
    NEW YORK, May 3 (Reuters) - U.S. natural gas futures slipped
early on Friday, falling under $4 per million British thermal
units for the first time in about a month in continuation of
Thursday's 7-percent selloff.
    Traders said Thursday's unexpectedly large weekly inventory
build and forecasts for milder weather later this month have
added pressure to prices, after they rose to their highest level
in 21 months on Wednesday.
    A long cold winter put a huge dent in inventories, and
lingering cool weather this spring led to a slow start to the
injection season.
    But most traders said the expected onset of milder spring
weather soon will finally curb any late-season heating demand
before heavy cooling loads kick in.
    As of 9:23 a.m. EDT (1323 GMT), front-month June natural gas
futures on the New York Mercantile Exchange were at
$4.017 per mmBtu, down 0.8 cent, after sliding as low as $3.977.
    The contract sank 7 percent on Thursday, its biggest one-day
loss in nine months, after rising to $4.444 on Wednesday, its
highest mark since late July 2011.
    Goldman Sachs said in a report on Friday that the market
reaction to the large build was "likely overdone" and that they
were maintaining their near-term $4.25/mmBtu price forecast with
a $4.50 average for the second half of 2013. 
    The latest National Weather Service six to 10-day forecast
issued on Thursday again called for above-normal temperatures
for about the western third of the country and in New England
and below-normal readings for most of the remainder of the
    Nuclear plant outages totaled 18,500 megawatts, or 18
percent of U.S. capacity, down from 20,400 MW out on Thursday,
21,700 MW out a year ago and a five-year average outage rate of
21,700 MW. 
    Thursday's gas storage report from the U.S. Energy
Information Administration showed domestic inventories rose last
week by 43 billion cubic feet, above Reuters poll estimates for
a 28 bcf build and the year-ago gain of 31 bcf. 
    But inventories started the injection season about three
weeks later than expected due to the unusually cold spring and
stocks, at 1.777 trillion cubic feet are nearly 31 percent below
last year and more than 6 percent below the five-year average.

    Early injection estimates for next week's report range from
43 bcf to 84 bcf versus a 30-bcf build during the same week last
year and a five-year average rise for that week of 69 bcf.
    EIA data earlier this week showed gross natural gas
production in February climbed for the first time in three
months. Output rose to about 1.27 bcf per day, or 1.8 percent
above the same month last year, after dropping below year-ago
levels in January for the first time since 2010. 
    The report dimmed prospects that record high production
would slow anytime soon despite Baker Hughes gas drilling rig
data last week that showed the rig count dropped to a 14-year
low. Traders awaited the next Baker Hughes drilling rig report
that will be released later Friday.