US natgas little changed ahead of weekly storage data
* Front month up from Monday's lowest mark since Feb. 2002 * Mild weather on tap for much of the nation * US crude futures also little change early * Coming Up: EIA natgas storage data Thursday NEW YORK, April 5 (Reuters) - U.S. natural gas futures were little changed in early trading Thursday as the market awaited direction from government storage data due out later this morning after sliding early this week to a 10-year low. Most traders expect another modest build to already record high inventories, far more bearish in comparison to the usual drawdown from storage at this time last year. In addition, the cooler weather of early this week was expected to moderate over much of the nation in the coming days, further dampening demand. Front-month May natural gas futures on the New York Mercantile Exchange were at $2.133 per million British thermal units in early activity, down 0.8 cent. They hovered above Monday's $2.069 which marked the lowest price for a front month contract since February 2002. While technical traders said the market was oversold and due for a bounce after sliding nearly 7 percent, few expected much of one, with the moderating weather outlook expected to limit any late heating or early cooling loads. The front month lost 19 percent in March, its biggest monthly drop since August 2010. The contract also shed 29 percent from January to March to post in the biggest quarterly decline in two years. INVENTORY WORRIES EIA data last week showed total gas inventories rose to 2.437 trillion cubic feet, driving stocks further into record territory for this time of year and sharply widening the already huge surpluses to year-ago and the five-year average. . (Storage graphic: link.reuters.com/mup44s) Injection estimates for this week's EIA report ranged from 10 bcf to 45 bcf with most traders and analysts expecting data to show a build of about 32 bcf when it is released today at about 10:30 a.m. EDT, a Reuters poll showed. Storage fell an adjusted 29 bcf in the same week last year and on average over the past five years has gained 8 bcf for that week. Utilities typically build inventories from April through October to help meet peak winter heating needs, but builds this year started two weeks earlier than usual, and storage is set to finish the month near 2.5 tcf, about 60 percent above normal and easily above the previous record of 2.148 tcf set in 1983. The inventory surplus will provide a hefty cushion to meet any spikes in demand or storm-related disruptions in supply this year. It is expected to grow further in coming weeks, at least until stronger air conditioning demand slows builds. PRODUCTION NOT EXPECTED TO SLOW SOON Baker Hughes data last week showed the gas-directed rig count rose for the first time in 12 weeks to 658. The count hit a 10-year low of 652 the prior week. (Rig graphic: r.reuters.com/dyb62s ) The steady drop in dry gas drilling this year -- the gas count is still down nearly 30 percent since peaking at 936 in mid-October -- had stirred expectations that low prices would finally force producers to curb gas output and tighten supplies. But the drop has yet to be reflected in pipeline flows, which are still estimated to be at or near record high levels, primarily due to rising output from shale. U.S. Energy Information Administration production data last week offered little hope for bulls, with January gross gas output climbing to a record of 72.85 billion cubic feet per day, eclipsing the previous peak of 72.68 bcfd in November. The slight drop the agency reported for December, the first measurable decline since well freeze offs curbed output in January and February 2011, had raised expectations that producers might finally be curtailing output. Some analysts say the gas-directed rig count may have to drop below 600 to reduce flowing supplies significantly. Most analysts do not expect any major slowdown in gas output until later this year. (Reporting by Eileen Houlihan; Editing by John Picinich)
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