U.S. natural gas futures slip 2 pct ahead of holiday

Mon Dec 24, 2012 10:42am EST

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NEW YORK, Dec 24 (Reuters) - Front-month U.S. natural gas
futures lost ground on Monday, undermined by near record-high
supplies and concerns that winter will not be cold enough to
whittle down the huge amount of gas in inventory.
    Traders said activity was fairly quiet ahead of the
Christmas holiday on Tuesday. New York Mercantile Exchange floor
trading will close early on Monday at 1:30 p.m. EST (1830 GMT)
and will remain closed on Tuesday for Christmas.    
    "The storage (withdrawal in this week's inventory report) is
going to be soft again. The bulls are going to have to wait for
the cold temps to kick up the storage burns next month," Drew
Wozniak, vice president at ICAP Energy, said in a report. 
    At 10:20 a.m. EST (1520 GMT), front-month January natural
gas futures on the New York Mercantile Exchange, which
expire on Thursday, were down 7.9 cents, or 2.3 percent, at
$3.373 per million British thermal units after trading between
$3.352 and $3.461.
    The front contract, which hit a 13-month high of $3.933 per
mmBtu four weeks ago and a 2-1/2-month low of $3.261 on Dec. 14,
gained 4.1 percent last week.
    Without some sustained cold to boost heating loads, most
traders agree it will be difficult for gas prices to move much
higher with inventories still at record highs for this time of
year and production flowing at or near an all-time peak.
    Traders also noted that demand typically slows during the
Christmas and New Year holiday weeks regardless of weather
because many schools and businesses are closed.
    Early cash quotes for Dec. 25-26 delivery at Henry Hub
NG-W-HH, a key supply point in Louisiana, slipped 11 cents to
$3.31 on very light, pre-holiday volume of 70 million cubic
feet. The Hub posted a 2-1/2-month low of $3.15 on Dec. 14.
    Early Hub differentials weakened to about 7 cents under
NYMEX versus a 4-cent discount on Friday.
    Prices on the Transco pipeline at the New York citygate
NG-NYCZ6 lost a dime to $4.00 despite the colder outlook for
this week. Volume was light at about 100 mmcf.    
    Commodity Weather Group still expects a cold pattern to
continue for most of the United States for the next two weeks,
but many traders remained skeptical about 10-day and 15-day
forecasts, noting computer projections that far out have not
been reliable, often flipping from warm to cold and back again.
    If the weather stays cold, traders said gas prices could
garner support from nuclear plant outages, which are still
running at about 11,600 megawatts this week, or nearly 5,000 MW
above average for this time of year. Gas-fired plants are
typically used to replace any lost nuclear generation.

 (Reporting By Joe Silha; Editing by Maureen Bavdek)
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