UPDATE 3-US natgas futures end near flat despite bearish EIA data

Thu Jan 31, 2013 3:53pm EST

* Storage draw falls short of estimates, 1st time in 5 weeks
    * Outlook turns slightly colder but milder temps still ahead
    * Coming Up: Baker Hughes rig data, CFTC trade data Friday


    By Joe Silha
    NEW YORK, Jan 31 (Reuters) - Front U.S. natural gas futures
ended near unchanged on Thursday in seesaw trade as fairly cold
Northeast and Midwest weather forecasts for the next five days
countered some early selling after a slightly bearish weekly
inventory report.
    Data from the U.S. Energy Information Administration showed
that total domestic gas inventories fell last week by 194
billion cubic feet to 2.802 trillion cubic feet. 
    Most traders viewed the decline as slightly bearish, noting
it came in below the Reuters poll estimate of 206 bcf and fell
short of market expectations for the first time in five weeks.
    "The lower-than-anticipated storage withdrawal fueled yet
another selloff ... but forecast uncertainty has led to wild
swings in natural gas prices this week," BNP analyst Teri
Viswanath said in a report.
    Some traders saw the draw as slightly supportive, noting it
easily topped the 149 bcf decline seen during the same week last
year and the five-year average drop for that week of 178 bcf.
    Front gas futures on the New York Mercantile Exchange
ended up 0.4 cent at $3.339 per million British thermal units
after posting an intraday low of $3.243 after the EIA report. 
    The nearby contract, which hit a 6-1/2 week high of $3.645
early last week, has gained 3.5 percent in the last two sessions
following a 9.5 percent slide in six sessions through Tuesday. 
    That selloff helped turn the technicals bearish, but some
chart watchers said the market was oversold and due for a
bounce.
    Some fundamental traders also noted that gas prices at
current levels were again competitive with coal and should draw
more utility interest for power generation.
    But many traders remain skeptical of any upside in prices
unless the cold is sustained, with inventories still relatively
high and production flowing at or near a record pace.
    MDA Weather Services on Thursday said there were some minor
colder tweaks made today in the six-to-10-day outlook, but the
private forecaster still expects progressive warming through the
central & eastern U.S. during that period.
    
    STORAGE DRAW FALLS SHORT OF EXPECTATIONS
    The weekly inventory draw again widened the deficit relative
to last year by 45 bcf to 202 bcf, or 7 percent below last
year's record highs for that time, a supportive trend.
    But while it also trimmed 16 bcf from the overhang versus
the five-year average, traders noted that storage is still
relatively high at 304 bcf, or 12 percent, above that benchmark.

    Early withdrawal estimates for next week's inventory report
range from 140 bcf to 173 bcf. That would be well above the 94
bcf pulled from storage during the same week in 2012 but in line
with the five-year average decline for that week of 165 bcf.    
    If drawdowns for the rest of winter match the five-year
average pace, inventories will end March at 2.032 tcf, about 18
percent above normal but 18 percent below last year, when stocks
finished a very mild heating season at a record high 2.48 tcf.  
 

    PRODUCTION STILL AT, NEAR RECORD HIGHS
    EIA data on Thursday also showed that November gross natural
gas production in the lower 48 U.S. states climbed to a record
high 73.88 bcf per day, the third straight monthly record.    
Output is still running about 1.42 bcf per day, or 2 percent,
above the same year-ago month. 
    Baker Hughes will issue its next drilling rig report
on Friday. While the company's gas-directed rig count is
hovering not far above a 13-1/2 year low hit nearly three months
ago, production has shown no significant signs of slowing.
    
    The EIA estimates that marketed gas output in 2013 will hit
a record high for the third straight year.
FILED UNDER: