UPDATE 3-US gas futures end down on profit-taking from 6-wk high

Tue Jan 22, 2013 3:39pm EST

* Front month well above recent 3-month spot low
    * Support from above-normal nuclear outages, near-term cold
    * Record production, long-term mild weather limit gains


    By Eileen Houlihan
    NEW YORK, Jan 22 (Reuters) - U.S. natural gas futures ended
lower for the first time in four sessions and just the second
time in eight sessions on Tuesday, pressured by some
profit-taking after a 15 percent run-up to a six-week spot chart
high.
    While cold near-term weather and above-normal nuclear power
plant outages have supported prices the past two weeks, milder
weather on tap in long-term outlooks, record high production and
bloated inventories are likely to limit more gains, traders
said.
    "The natural gas market is backing off from higher levels in
anticipation of a warming trend, with temperatures at a possible
seasonal low this week," said Citi Futures energy specialist Tim
Evans. "The overall temperature outlook seems more likely to
produce choppy trade in the middle portion of the recent trading
range rather than a sustained move in either direction." 
    Front-month February natural gas futures on the New York
Mercantile Exchange slid 0.8 cent to settle at $3.558 per
million British thermal units. The contract rose as high as
$3.645 in electronic trading, the highest mark for a front month
since early December.
    It also fell to $3.05 in early January, a contract low and
the lowest mark for a front-month contract since late September.
    Other months ended slightly lower as well, with the March
contract losing 0.7 cent to finish at $3.558 and summer
months off about 0.1 cent each. 
    NYMEX floor trading and other financial markets were closed
on Monday for the U.S. Martin Luther King holiday.
    In the cash market, gas for delivery Wednesday at the NYMEX
benchmark Henry Hub in Louisiana rose 9 cents on
average to a two-month high of $3.63.
    With the cold centered in the Northeast, gas on the Transco
pipeline at the New York citygate jumped $7.25 on
average to $23.10, its highest price in five years.
 
    Forecaster MDA Weather Services called for far-below-normal
temperatures for most of the eastern half of the nation in its
one- to five-day outlook, but the forecast switched to
above-normal readings for the East in its six- to 10-day
outlook.
    The latest National Weather Service six- to-10-day forecast 
issued on Monday agreed, with above-normal readings stretching
across the eastern third of the nation and across the South
through Texas, with normal or below-normal temperatures confined
to the West.
    Nuclear outages totaled 10,600 megawatts, or 11 percent of
U.S. capacity, up from 9,100 MW out on Friday, 9,500 MW out a
year ago, and a five-year average outage rate of about 8,400 MW.
 
    
    ANOTHER BIG STORAGE DRAW, BUT STOCKS ABOVE AVERAGE
    Last week's gas storage report from the U.S. Energy
Information Administration showed inventories fell the prior
week by 148 billion cubic feet, above industry expectations for
a 136-bcf draw. 
    Declines have beat industry expectations for the past three
weeks, with the data reflecting what could be some permanent
underlying growth in demand this year as utilities switch from
coal to cheaper gas for power generation.
    Despite the large draws, storage remains at 3.168 trillion
cubic feet, about 4 percent below year-earlier levels, but more
than 11 percent above the five-year average.

    Inventories started the heating season in early November at
3.929 tcf, the fourth straight year in which they have headed
into the heating season at a record peak.
    Early withdrawal estimates for this week's storage report
range from 122 bcf to 181 bcf versus 162 bcf pulled from
inventory during the same week last year and the five-year
average decline for that week of 176 bcf.
    
    RIGS SLIDE, BUT OUTPUT NEAR RECORD
    Baker Hughes data on Friday showed the gas-directed rig
count had fallen by five to 429, its second straight weekly
loss. 
    Drilling for natural gas has mostly declined for more than a
year, with gas rigs down 54 percent since peaking at 936 in
October 2011.

    But the EIA also said recently that it expected gas output
in 2013 to rise to 69.84 bcf per day, the third straight annual
record.
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