U.S. natgas futures edge higher after bouncing off support

Wed May 8, 2013 9:57am EDT
 
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* Front month still below recent 21-month high
    * Weather expected to moderate over next two weeks
    * Nuclear power plant outages remain below average

    By Eileen Houlihan
    NEW YORK, May 8 (Reuters) - U.S. natural gas futures edged
higher on Wednesday, bouncing off technical support after
sinking to a more than one-month low on the spot chart amid
milder, spring-like weather and expectations for another large
weekly inventory build.
     Last week's unexpectedly large weekly inventory build led
to a 7-percent selloff on Thursday before prices recovered
slightly on Friday.
    Prices remain well under last week's 21-month high hit at 
midweek.
    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 the onset of milder spring weather starting this week
has curbed late-season heating demand before heavy cooling loads
kick in.
    As of 9:38 a.m. EDT (1338 GMT), front-month June natural gas
futures on the New York Mercantile Exchange were at
$3.958 per million British thermal units, up 3.8 cents, after
sliding as low as $3.895, the lowest mark since early April.
    After breaking minor support at the 20-day and 40-day moving
averages over the last week, chart traders said Tuesday's weak
close broke support in the $3.94 area, which was the 38.2
percent Fibonacci retracement of the $1.319 move from the
February low of $3.125 to last week's 21-month high of $4.444.

    The latest National Weather Service eight to 14-day forecast
issued on Tuesday called for above-normal temperatures for about
the western third of the nation and below-normal readings in the
Southeast and most of Texas. Near-normal temperatures were
expected for the Midwest, mid-Atlantic and most of the
Northeast.
    Nuclear plant outages totaled 18,800 megawatts, or 19
percent of U.S. capacity, down from 18,900 MW out on Tuesday,
21,700 MW out a year ago and a five-year average outage rate of
20,500 MW. 
    
    LARGER-THAN-EXPECTED BUILD BUT STOCKS BELOW NORMAL
    Last week's gas storage report from the U.S. Energy
Information Administration showed domestic inventories rose in
the prior 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 cold spring. 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 Thursday's EIA gas storage
report range from 58 to 91 bcf, versus a 30 bcf build in the
same week last year and a five-year average rise for that week
of 69 bcf.
    Baker Hughes data last week showed the number of
rigs drilling for natural gas in the United States fell by 12 to
an 18-year low of 353.