U.S. natgas futures edge higher ahead of cold weekend
* Front month remains above recent 3-month low * Colder weather returns to eastern United States * Nuclear outages running near normal levels * Coming Up: Baker Hughes gas drilling rig data Friday By Eileen Houlihan NEW YORK, Feb 1 (Reuters) - U.S. natural gas futures edged higher early Friday, boosted by expectations for stronger heating amid another burst of cold in the eastern half of the country late this week. But with milder weather on tap by mid-month and a lighter-than-expected weekly withdrawal from inventories on Thursday, most traders expect limited upside. As of 9:17 a.m. EST (1417 GMT), front-month March natural gas futures on the New York Mercantile Exchange were at $3.367 per million British thermal units, up 2.8 cents, or less than 1 percent. The front month contract hit a 6-1/2-week high of $3.645 early last week after hitting a more than three-month low of $3.05 in early January. Forecaster MDA Weather Services said cold would linger from the Midwest through the East for the next five days, but a return to above-normal or some far-above-normal temperatures was expected in the six to 10-day outlook. The latest National Weather Service six to 10-day forecast issued on Thursday also called for above-normal readings for a little more than the eastern half of the country, with near-normal or below-normal temperatures in the West. Nuclear outages totaled just 6,200 megawatts, or 6 percent of U.S. capacity, down from 6,800 MW out on Thursday and 10,400 MW out a year ago, but on par with a five-year average outage rate of about 6,200 MW. STORAGE DRAW FALLS SHORT OF EXPECTATIONS Thursday's gas storage report from the U.S. Energy Information Administration showed domestic gas inventories fell last week by 194 billion cubic feet, below industry expectations for a 206 bcf draw. Most traders viewed the decline as bearish, noting it was below market expectations for the first time in five weeks. But others noted the draw was above both the year-ago drop of 149 bcf and the five-year average draw of 178 bcf. Storage now stands 202 bcf, or about 7 percent, below last year's levels, but 304 bcf, or more than 12 percent, above the five year-average level. Early withdrawal estimates for next week's inventory report range from 140 bcf to 173 bcf, 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. GAS RIG COUNT GAINS, FIRST TIME IN THREE WEEKS Traders were waiting for the next Baker Hughes gas drilling rig report to be released later Friday. Data last week showed the gas-directed 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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