U.S. natgas futures edge lower ahead of weekly storage data
* Front month remains above recent 3-month low * Colder weather set to return to Midwest * Nuclear outages running just above normal * Coming Up: EIA natgas storage data Thursday By Eileen Houlihan NEW YORK, Jan 31 (Reuters) - U.S. natural gas futures edged lower early Thursday, sliding for the seventh time in eight sessions despite some near-term cold weather in the Midwest and expectations for another big weekly inventory withdrawal. Traders said expectations for the big draw had likely already been priced into the market, with Thursday's data expected to show the largest draw of the heating season so far. With the cold weather not expected to last in consuming regions and nuclear outages only running slightly above normal, most traders expect limited upside. A Reuters poll showed traders and analysts expect weekly data from the U.S. Energy Information Administration to show a draw of about 206 billion cubic feet when it is released at 10:30 a.m. EST (1530 GMT.) Stocks slid 149 bcf during the same week last year and on average over the past five years have fallen 178 bcf that week. As of 9:36 a.m. EST (1436 GMT), front-month March natural gas futures on the New York Mercantile Exchange were at $3.32 per million British thermal units, down 1.5 cents, or less than 1 percent. The front month contract hit a 6-1/2-week high of $3.645 early last week before losing more than 9 percent in six sessions followed by a more than 2 percent gain on Wednesday. The spot contract also hit a more than three-month low of $3.05 in early January. Forecaster MDA Weather Services said cold would linger in the Midwest for the next five days, with a return to above-normal or far-above-normal temperatures for much of the country in the six to 10-day outlook. The latest National Weather Service six to 10-day forecast issued on Wednesday also called for above-normal readings for most of the nation with near-normal temperatures along both coasts. Nuclear outages totaled 6,800 megawatts, or 7 percent of U.S. capacity, down from 7,100 MW out on Wednesday and 11,000 MW out a year ago, but up from a five-year average outage rate of about 6,500 MW. BIG STORAGE DRAWS FAIL TO FIRM PRICES Last week's EIA gas storage report showed domestic gas inventories fell in the prior week by 172 bcf, above industry expectations for a 167 bcf draw. Most traders viewed the decline as supportive, noting it was the fourth straight week that declines topped industry expectations. Traders said the recent larger-than-expected inventory draws could be reflecting new growth in gas use this year as utilities switch from coal to cheaper gas for power generation. But despite the large withdrawals, storage remains at 2.996 trillion cubic feet, about 5 percent below year-earlier levels, but 12 percent above the five-year average. If drawdowns for the rest of the winter match the five-year average, inventories will end March at 2.048 tcf, about 18 percent above normal but 17 percent below last year, when stocks finished a very mild heating season at a record-high 2.48 tcf. GAS RIG COUNT GAINS, FIRST TIME IN THREE WEEKS Baker Hughes data last week showed the gas-directed drilling rig count gained for the first time in three weeks, rising by five to 434. Drilling for natural gas has mostly been in decline for more than a year, with the rig count not far above the 13-1/2-year low of 413 posted in early November. But so far production has shown no significant sign of slowing. The EIA estimates that gas output in 2013 will hit a record high for the third straight year.
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