March 14, 2013 / 1:47 PM / in 5 years

UPDATE 3-U.S. natgas futures end up 4 pct, hit 3-1/2 month high

* Front month at highest mark since late November
    * Nuclear outages still running above normal
    * Some cold weather back on tap in long-term outlooks
    * Coming Up: Baker Hughes gas drilling rig data on Friday

    By Eileen Houlihan
    NEW YORK, March 14 (Reuters) - U.S. natural gas futures rose
nearly 4 percent on Thursday to a 3-1/2 month spot chart high,
extending early gains after government storage data showed a
fourth straight larger-than-expected weekly drawdown from
    Cold weather returning to consuming regions of the nation
late this week and on tap for next week, continued technical
buying and above-average nuclear power plant outages also kept
momentum to the upside.
    "The heating degree days bonanza is not over. Look at the
latest updates and we're seeing cold weather in most of the
Lower 48 all the way to the end of March," said macro strategist
Richard Hastings at Global Hunter Securities.
    "If this is the case, then gas demand will remain robust for
at least two more weeks," Hastings added.
    Front-month April natural gas futures on the New York
Mercantile Exchange rose 13.2 cents, or 3.6 percent, to
settle at $3.812 per million British thermal units.
    The contract rose as high as $3.824, the highest mark for a
spot contract since late November.
    Most traders agreed the chart picture remained supportive
after the front-month contract broke through several key
resistance levels on its 22 percent run up from the five-week
low of $3.125 hit in mid-February.
    But some cautioned that the impending end of winter could
provide resistance to higher prices.
    "Strong end-of-season weather factors and high levels of
electric power sector demand for gas from idled nuclear plants
have combined to push gas prices higher, but the approaching
start of spring's slack demand shoulder season should provide
growing resistance to rising prices in the coming weeks," said
Addison Armstrong, senior director of market research at
Tradition Energy.
    In the cash market, gas for Friday delivery at the NYMEX
benchmark Henry Hub in Louisiana rose 2 cents to a
3-1/2 month high of $3.74.
    Late deals firmed to 11 cents over the front month, from
deals done late Wednesday at a 5-cent premium.
    Gas on the Transco pipeline at the New York citygate , however, slid 15 cents to $4 as utilities pulled gas
from storage rather than purchase in the spot market.
    Forecaster MDA Weather Services called for warmth to build
in the western United States in its one- to five-day outlook,
but colder weather in northern regions, including the Northeast.
    The latest National Weather Service six- to 10-day forecast
issued on Wednesday called for below-normal temperatures for
much of the country, with above-normal readings in the Southeast
stretching into Texas.
    Nuclear outages totaled about 17,400 megawatts, or 17
percent of U.S. capacity, flat to Wednesday's levels and up from
a five-year average outage rate of 16,300 MW but down from
19,600 MW out a year ago. 
    U.S. Energy Information Administration data on Thursday
showed storage fell 145 billion cubic feet last week, above
Reuters poll expectations for a 134 bcf draw, the year-ago drop
of 66 bcf and the five-year average decline for that week of 74
    The data showed domestic gas inventories are now at 1.938
trillion cubic feet, nearly 19 percent below last year's record
high levels for this time of year, but about 11 percent above
the five-year average level. 
    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.
    Early withdrawal estimates for next week's EIA storage
report range from 48 bcf to 69 bcf, versus a flat year-ago week
and a five-year average withdrawal of 26 bcf for that week.
    Traders were waiting for the next Baker Hughes gas
drilling rig report to be released on Friday. Data last week
showed the gas-directed 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.
    While the EIA on Tuesday lowered its growth forecast for
2013, it still expects marketed gas production to hit a record
high for the third straight year.

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