U.S. natgas futures edge lower ahead of weekly inventory data

Thu Feb 14, 2013 9:49am EST

* Front month remains above recent 3-month low
    * Colder weather set to return by next week
    * Nuclear outages running well above normal levels
    * Coming Up: EIA natgas storage data Thursday

    By Eileen Houlihan
    NEW YORK, Feb 14 (Reuters) - U.S. natural gas futures edged
lower early on Thursday, despite expectations for a large weekly
inventory withdrawal and colder weather forecast to move back
into consuming regions of the nation by next week.
    Most traders said with winter winding down and storage still
bloated, more downside was expected.
    But others noted above-normal nuclear power plant outages
that could help limit losses.
    Most traders and analysts expect weekly data from the U.S.
Energy Information Administration to show a draw of about 162
billion cubic feet when it is released at 10:30 a.m. EST (1530
GMT), a Reuters poll showed. 
    Stocks fell an adjusted 113 bcf in the same week last year,
and on average over the past five years have fallen 154 bcf that
week.
    As of 9:39 a.m. EST (1439 GMT), front-month March natural
gas futures on the New York Mercantile Exchange were at
$3.277 per million British thermal units, down 2.9 cents, or
less than 1 percent.
    The front month contract hit a 6-1/2 week high of $3.645 in
late January after touching more than a three-month low of $3.05
in early January. 
    Forecaster MDA Weather Services called for a "chilly"
weekend in the eastern U.S. in its one to five-day outlook.
    In its six to 10-day forecast, as well as the latest
National Weather Service six to 10-day forecast issued on
Wednesday, both called for normal or below-normal temperatures
for most of the nation.
    Nuclear outages totaled 14,100 megawatts, or 14 percent of
U.S. capacity, up from 13,200 MW out on Wednesday, 12,200 MW out
a year ago and a five-year average outage rate of about 8,900
MW. 
    
    ANOTHER BELOW AVERAGE STORAGE DRAW 
    Last week's EIA storage report showed total domestic
inventories fell the prior week by 118 bcf 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.
    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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