U.S. natgas futures down early for 3rd day on milder weather

Mon Feb 11, 2013 9:38am EST

* Front month still above recent 3-month low
    * Near-term mild weather could turn cold again next week
    * Nuclear outages running well above normal levels

    By Eileen Houlihan
    NEW YORK, Feb 11 (Reuters) - U.S. natural gas futures slid
for a third straight day early Monday, pressured by near-term
milder weather in consuming regions this week after a winter
storm over the weekend.
    In addition, bloated inventories and record production added
more weight to the downside.
    But with some colder weather back in the six- to 10-day
outlooks and nuclear plant outages running well above normal,
some traders expect limited downside.
    Still others said time could be running out for winter.
    As of 9:22 a.m. EST (1422 GMT), front-month March natural
gas futures on the New York Mercantile Exchange were at
$3.221 per million British thermal units, down 5.1 cents, or
nearly 2 percent.
    The front month contract hit a 6-1/2 week high of $3.645 in
late January after touching a more than three-month low of $3.05
in early January. 
    Forecaster MDA Weather Services called for above-normal
temperatures from the Midwest through the East in its one- to
five-day outlook.
    But in its six- to 10-day forecast, as well as the latest
National Weather Service six- to 10-day forecast issued on
Sunday, both called for below-normal readings for most of the
nation.
    Nuclear outages totaled 12,100 megawatts, or 12 percent of
U.S. capacity, up from 10,800 MW out a year ago and a five-year
average outage rate of about 8,400 MW. 
    
    ANOTHER BELOW AVERAGE STORAGE DRAW 
    Last week's gas storage report from the U.S. Energy
Information Administration showed total domestic inventories
fell the prior 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 Reuters poll estimates for a 132 bcf drop.

    While stocks are now 8 percent below last year's record
levels, they are 15 percent above the five-year average level
for this time of year.
    Estimates for this week's inventory report range from 128
bcf to 180 bcf versus a year-ago drop of 113 bcf and a five-year
average decline for that week of 154 bcf.
    If withdrawals for the rest of winter match the five-year
average, stocks will end March at 2.079 tcf, about 20 percent
above normal, but 16 percent below last year, when inventories
finished a very mild heating season at a record high 2.48 tcf.
    
    DRILLING DECLINES, PRODUCTION FAILS TO SLOW
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell for the fourth time in five weeks,
dropping by three to 425. 
    But while the gas rig count is hovering not far above the 
13-1/2-year low of 413 hit three months ago, production has
shown no significant sign of slowing.

    Producers have curbed dry gas drilling but the associated
gas produced by more profitable liquids-rich wells has kept gas
flowing at or near a record pace.
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