U.S. natural gas futures hold modest gains as cold moves in

Wed Dec 26, 2012 10:02am EST

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NEW YORK, Dec 26 (Reuters) - Front-month U.S. natural gas
futures held modest gains early Wednesday, backed by chilly U.S.
weather forecasts for the next 10 days that should boost gas
demand by forcing homeowners and businesses to crank up their
heaters.
    After mild early December weather pressured the front month
to a 2-1/2-month low at mid month, traders noted heating demand 
was picking up with falling temperatures, first in the Midwest
and now in the East.
    But while the next 10 days were likely to remain below
normal for most of the country, traders said some forecasters
were looking for a warm-up in the 15-day outlook.
    Unless the cold is sustained, most traders agree it will be
difficult for gas prices to move much higher with inventories
still at record levels for this time of year and production
flowing at or near an all-time peak.
    At 9:45 a.m. EST (1445 GMT), front-month January natural gas
futures on the New York Mercantile Exchange, which expire
on Thursday, were up 2.5 cents, or 0.8 percent, at $3.371 per
million British thermal units after trading between $3.30 and
$3.388.
    The front contract, which hit a 13-month high of $3.933 five
weeks ago, slid to a 2-1/2-month low of $3.261 in mid-December.
    While gas demand can slow during the holidays regardless of
weather because many schools and businesses are closed, traders
said prices could garner support from nuclear plant outages.
which are still running at about 11,400 megawatts this week, or
nearly 6,000 MW above average for this time of year.
    Gas-fired plants are typically used to replace any lost
nuclear generation
    Early cash quotes for Thursday delivery at Henry Hub
NG-W-HH, a key supply point in Louisiana, gained 5 cents to
$3.35 on fairly light, post-holiday volume of 310 million cubic
feet. The Hub posted a 2-1/2-month low of $3.15 on Dec. 14.
    Early Hub differentials firmed to about 2 cents under NYMEX
from a 7-cent discount on Monday.
    Prices on the Transco pipeline at the New York citygate
NG-NYCZ6 jumped 18 cents to $4.14 on the cold late-week
outlook.  Volume was light at about 45 mmcf.    
    Commodity Weather Group still expects a cold pattern to
continue for most of the United States for the next 10 days, but
the private forecaster noted some uncertainty about computer
predictions for a warm-up in the 11- to 15-day outlook.

 (Reporting By Joe Silha; Editing by Maureen Bavdek)
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