US natural gas futures edge higher as blizzard hits Northeast

Fri Feb 8, 2013 9:34am EST

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.
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