UPDATE 3-US gas futures rise near 3 pct on big EIA storage draw

Fri Jan 4, 2013 3:31pm EST

* Front month remains above Wednesday's 3-month spot low
    * Long-term outlooks call for mostly mild weather
    * Weekly inventory draw larger-than-expected


    By Eileen Houlihan
    NEW YORK, Jan 4 (Reuters) - U.S. natural gas futures rose
nearly 3 percent on Friday, gaining for the first time in four
sessions after government storage data showed a
larger-than-expected drawdown from winter inventories.
    "Today's natural gas inventory report was biased to the
bullish side from the perspective that it showed a net
withdrawal greater than most of the consensus forecasts as well
as both last year's draw and the net withdrawal for the five
year average for the same week," said Energy Management
Institute's Dominick Chirichella.
    Front-month February natural gas futures on the New York
Mercantile Exchange rose 8.9 cents, or just under 3
percent, to settle at $3.287 per million British thermal units.
    The contract rose as high as $3.299 after data from the U.S.
Energy Information Administration showed gas inventories fell
last week by 135 billion cubic feet, above industry expectations
for a 127 bcf draw. 
    But despite the big draw, traders said storage still remains
at 3.517 trillion cubic feet, nearly 1 percent above year-ago
levels and more than 12 percent above the five-year average
level.

    With fairly mild weather on tap for the next few weeks,
traders expect the upside to be limited unless some sustained
cold arrives to boost heating loads and further draw down
storage.
    The latest National Weather Service six-to-10-day forecast
issued on Thursday again called for above-normal temperatures
for the eastern half of the U.S., with below-normal readings for
most of the western half.
    Other months also gained on Friday, with the March contract
 rising 8.9 cents to $3.30 and summer months rising about
8 cents each. 
    In the cash market, weekend gas for delivery at the NYMEX
benchmark Henry Hub in Louisiana rose 1 cent on
average to $3.20.
    Late deals eased to 6 cents under the front-month contract,
from deals done late Thursday at a 3-cent discount.
    Gas on the Transco pipeline at the New York citygate fell more than $1 to average $4.83.
    Nuclear outages totaled just 7,500 megawatts, or 7 percent,
of U.S. capacity, even with outages on Thursday, but up from
4,300 MW out a year ago and a five-year average outage rate of
about 5,000 MW. 
    
    WINTER STORAGE STILL BLOATED
    Inventories started the heating season in early November at
a record high 3.929 tcf, the fourth straight year that
inventories have headed into the heating season at an all-time
peak.
    Early withdrawal estimates for next week's EIA storage
report range from 155 bcf to 176 bcf versus a 137-bcf decline
during the same year-ago week and a five-year average draw for
that week of about 165 bcf.
    
    RIGS GAIN, OUTPUT STILL NEAR RECORD
    Baker Hughes data on Friday showed the gas-directed rig
count rose by eight to 439, its third straight weekly gain.
 
    But drilling for natural gas has mostly declined for more
than a year, with gas rigs down 53 percent since peaking at 936
in October 2011.

    The gas rig count is hovering above a 13-1/2-year low of 413
hit eight weeks ago, but so far production has not shown any
significant sign of slowing. 
    The EIA expects gas output in 2013 to rise to a record high
of 69.59 bcf per day, the third straight annual record.
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