U.S. natgas futures seesaw early with mixed weather outlooks

Tue Feb 12, 2013 9:39am EST

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

    By Eileen Houlihan
    NEW YORK, Feb 12 (Reuters) - U.S. natural gas futures
seesawed on either side of positive territory early Tuesday,
with a bias to the upside amid prospects for more cold weather
next week after some milder conditions in consuming regions this
week.
    In addition, above-normal nuclear power plant outages were
helping to boost near-term demand, but bloated inventories and
record production could again add weight to the downside.
    As of 9:18 a.m. EST (1418 GMT), front-month March natural
gas futures on the New York Mercantile Exchange were at
$3.283 per million British thermal units, up 0.4 cent.
    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 seasonal or
above-seasonal temperatures in the eastern U.S. 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
Monday, both called for below-normal readings for most of the
nation.
    Nuclear outages totaled 13,100 megawatts, or 13 percent of
U.S. capacity, up from 12,100 MW out on Monday, 9,200 MW out a
year ago and a five-year average outage rate of about 8,100 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.
    Withdrawal 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 last week 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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