March 11, 2013 / 1:53 PM / in 5 years

UPDATE 3-U.S. natgas futures hit 3-mth high despite mild weather

* Front month hits fresh 2013 high
    * Milder weather on tap in long-term outlooks
    * Nuclear outages running above normal

    By Eileen Houlihan
    NEW YORK, March 11 (Reuters) - U.S. natural gas futures rose
on Monday to the highest level of 2013 and their loftiest mark
in just over three months, lifted by technical buying for a
third straight session despite milder weather forecasts that
should dampen late-winter heating demand.
    The nearby contract is up about 5 percent in the last three
sessions and nearly 17 percent from the five-week low of $3.125
per million British thermal units hit in mid-February.
    Traders said late-winter cold turned the chart picture more
supportive and helped prices break through some key technical
resistance points.
    Front-month April natural gas futures on the New York
Mercantile Exchange rose 2 cents, or 0.55 percent, to
settle at $3.649 per million British thermal units, after
trading as high as $3.652, the highest mark for a nearby
contract since early December, according to Reuters data.
    Other months ended higher as well, with the May contract
 up 1.6 cents at $3.689 and summer months rising about 2
cents each.
    In the cash market, gas for Tuesday delivery at the NYMEX
benchmark Henry Hub in Louisiana rose 7 cents to
average $3.64, with late deals firming to 5 cents over the front
month, from deals done late Friday at a 1-cent discount.
    Gas on the Transco pipeline at the New York citygate gained 13 cents to $3.88.
    But with storage still high, production flowing at or near
record levels and the milder weather outlooks, some traders said
more upside could be difficult.
    Forecaster MDA Weather Services called for warmth in the
western United States in its one to five-day outlook.
    The latest National Weather Service's six to 10-day forecast
issued on Sunday called for below-normal temperatures in much of
the Northeast, the Northwest and in South Florida, but
above-normal readings for the rest of the country.
    Nuclear outages totaled about 16,700 megawatts, or 17
percent of U.S. capacity, down from 19,600 MW out a year ago,
but up from a five-year average outage rate of about 15,500 MW.
    U.S. Energy Information Administration data last week showed
domestic gas inventories fell the prior week by 146 billion
cubic feet to 2.083 trillion cubic feet. 
    Most traders viewed the decline as bullish for prices,
noting it was the third straight week that the draw came in
above expectations. A Reuters poll showed traders and analysts
had forecast a 134 bcf drop.
    The draw was also well above the 92 bcf pull seen during the
same week last year and the five-year average drop of 107 bcf
for that week.    
    Storage is now 361 bcf, or 15 percent, below last year's
record highs for this time of year, but it is also 269 bcf, or
15 percent, above the five-year average level.

    Early withdrawal estimates for this week's inventory report
range from 88 bcf to 147 bcf, well above the 66 bcf pulled from
storage during the same week in 2012 and the five-year average
decline of 74 bcf for that week.
    A string of strong weekly withdrawals has prompted analysts
to sharply lower estimates for end-winter storage, with some
expecting inventories to drop to as low as 1.8 tcf, or about 4
percent above average.
    A Reuters poll in mid-January showed most analysts had
expected stocks to finish the heating season at about 2 tcf.
    So far this winter, nearly 500 bcf more gas has been pulled
from storage than last year.
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell 13 to a nearly 14-year low of 407.
    It was the fifth drop in six weeks, but production has not
slowed much, if at all, from the record high posted last year.

    The EIA expects marketed gas production in 2013 to hit a
record high for the third straight year.

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