US natgas futures seesaw, cool weather lifts prices to 2012 high

* Front month hits highest mark since December
* Nuclear power plant outages remain strong
* Cool weather on tap for much of nation
* Coming up: API oil data Tuesday, EIA oil data Wednesday

By Eileen Houlihan
NEW YORK, Oct 22 (Reuters) - U.S. natural gas futures
seesawed on either side of unchanged territory early on Monday,
with some cool weather and ongoing nuclear power plant outages
pushing the nearby contract to a fresh 2012 high.
But with the cool weather on tap for much of the nation in
the coming weeks, most traders expect limited downside.
Still others remain concerned that gas priced at well above
$3 per million British thermal units will continue to lose
market share to coal for power generation.
As of 9:25 a.m. EDT (1325 GMT), front-month November natural
gas futures on the New York Mercantile Exchange were at
$3.619 per mmBtu, up 0.2 cent, after climbing as high as $3.648,
the highest price for a spot contract since early December,
according to Reuters data.
The National Weather Service six- to 10-day outlook issued
on Sunday called for below- or much-below-normal temperatures
for about the eastern half of the nation, with above-normal
readings only on the West Coast and in parts of New England.
On the nuclear front, outages totaled about 25,700
megawatts, or 25 percent of U.S. capacity, up from 24,000 MW out
on Friday, 19,900 MW out a year ago and a five-year outage rate
of about 21,500 MW.

RECORD INVENTORIES
Last week's gas storage report from the U.S. Energy
Information Administration showed domestic inventories rose the
prior week by 51 billion cubic feet to 3.776 trillion cubic
feet.
Stocks remain 5 percent above year-ago levels and more than
7 percent above the five-year average.
(Storage graphic: link.reuters.com/mup44s)
While a huge inventory surplus, which peaked in late March
at nearly 900 bcf, has been cut by 80 percent, inventories are
still at record highs for this time of year.
At 89 percent full, stocks are already above the average
peak for the year of 3.7 tcf usually hit in early November.
Without some unseasonably cold weather soon, stocks are
likely to grow for three or four more weeks and easily end the
injection season above last year's all-time high of 3.852 tcf.

Early injection estimates for this week's EIA report range
from 52 bcf to 77 bcf versus a year-earlier build of 95 bcf and
the five-year average increase for that week of 65 bcf.

RIG COUNT EDGES HIGHER
Baker Hughes data on Friday showed the gas-drilling rig
count rose by five to 427, up from a 13-year low the previous
week.
(Rig graphic: r.reuters.com/dyb62s)
The count is still down 54 percent since peaking at 936
last October, with the decline feeding expectations that
producers were getting serious about stemming record supplies.
But so far there is little evidence that gas output is
slowing.
While dry gas drilling has become largely uneconomical at
current prices, gas produced from more-profitable shale oil and
shale gas liquids wells has kept output near record highs.

(Editing by Theodore d'Afflisio)