U.S. natgas futures edge higher on colder long-term weather

Mon Jan 7, 2013 9:26am EST

* Front month remains above last week's 3-month spot low
    * Long-term outlooks start to call for colder weather
    * Cold should make for more big storage draws

    By Eileen Houlihan
    NEW YORK, Jan 7 (Reuters) - U.S. natural gas futures rose
nearly 2 percent early on Monday, a second straight session of
gains as long-term weather outlooks began to call for some
colder weather for late this month and for early February,
traders said.
    Last week's larger-than-expected drawdown from winter
inventories also kept momentum to the upside, despite some
near-term milder weather that should curb heating demand in
consuming regions of the nation.
    As of 9:18 a.m. EST (1418 GMT), front-month February gas
futures on the New York Mercantile Exchange were at
$3.344 per million British thermal units, up 5.7 cents, or just
under 2 percent.
    The front-month contract fell to $3.05 last week, a contract
low and the lowest mark for a spot contract since late
September.
    The latest National Weather Service six-to-10-day forecast
issued on Sunday again called for above-normal temperatures for
about the eastern third of the United States, but below or
much-below-normal readings for the rest of the country.
    Private forecaster MDA Weather Services called for
below-normal readings for nearly the entire country in its 11 to
15-day outlook.
    Nuclear outages totaled 8,900 megawatts, or 9 percent, of
U.S. capacity, up from about 7,500 MW out on Friday, 5,400 MW
out a year ago and a five-year average outage rate of about
5,200 MW. 
    
    BIG WINTER DRAWDOWN BUT STORAGE STILL BLOATED
    Last week's gas storage report from the U. S. Energy
Information Administration showed gas inventories fell the prior
week by 135 billion cubic feet, above industry expectations for
a 127 bcf draw. 
    But despite the big draw, storage 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.

    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 this week's EIA 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.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.