US natural gas futures edge higher as blizzard hits Northeast
NEW YORK, Feb 8 (Reuters) - Front-month U.S. natural gas futures edged higher early on Friday, as a powerful blizzard swept into the Northeast and extended weather forecasts continued to trend colder. Despite Thursday's bearish weekly inventory report and the milder outlook for several days next week, traders expected heating demand to pick up when another shot of cold air moves into the Midwest later next week and then spreads east. "Temperature forecasts are little changed from yesterday, with above-normal temperatures expected across much of the East over the next five days, followed by a shift colder to normal to below-normal temperatures in the second half of February," Addison Armstrong at Tradition Energy said in a report. At 9:15 a.m. EST (1415 GMT), front-month gas futures on the New York Mercantile Exchange were up 1.1 cent at $3.296 per million British thermal units after trading between $3.27 and $3.314. Gas prices tried to rally early this week but Thursday's near 4 percent slide on bearish inventory data wiped out three days of gains and managed to turn what looked like a positive technical picture more neutral. Chart support was seen at last week's low in the $3.20 area, with resistance at about $3.50. Some traders said any move up was likely to prove difficult, with inventories still high, production flowing at or near an all-time peak and not enough sustained cold to put a serious dent in excess supplies. "A massive snow storm is forecast to enhance cold weather in the Northeast into this weekend and could delay warming trends early next week," Commodity Weather Group said in a report. The private forecaster also noted a colder pattern shift in the six-to-10-day forecast, with computer models showing below-normal temperatures for the western two-thirds of the nation, with seasonal readings expected in the East. ANOTHER BELOW AVERAGE STORAGE DRAW U.S. Energy Information Administration data on Thursday showed that total domestic gas inventories fell last week by 118 billion cubic feet to 2.684 trillion cubic feet. Most traders viewed the report as bearish, noting the draw came in well below the Reuters poll estimate of 132 bcf and fell short of market expectations for the second straight week. The withdrawal widened the deficit relative to last year by 24 bcf to 226 bcf, or 8 percent below 2012's record highs for that time. But it added 47 bcf to the surplus versus the five-year average, leaving storage still relatively high at 351 bcf, or 15 percent, above average for that time of year. Early withdrawal estimates for next week's inventory report range from 128 bcf to 180 bcf. Stocks fell an adjusted 113 bcf during the same week last year, while the five-year average decline for that week is 154 bcf. PRODUCTION FAILS TO SLOW DESPITE RIG DECLINES Baker Hughes will issue its next drilling rig report on Friday. While the company's dry gas rig count is hovering just above the 13-1/2 year low hit three months ago, record high production has shown no significant signs of slowing.