UPDATE 4-US natgas futures end down 4.3 pct, break chart support
* High inventories, record production weigh on prices * Coal switching, nuclear plant outages lend some support * Coming Up: Baker Hughes rig data, CFTC trade data Friday By Joe Silha NEW YORK, Feb 14 (Reuters) - U.S. natural gas futures ended down sharply on Thursday in active trade, as another weekly inventory report below market expectations drove the front-month contract below key technical support. U.S. Energy Information Administration data showed total domestic gas inventories fell last week by 157 billion cubic feet to 2.527 trillion cubic feet. Most traders viewed the decline as bearish for prices, noting it was the third straight week that the draw fell short of market expectations. A Reuters poll on Wednesday showed traders and analysts had expected a 162-bcf drop. "With precious little time left to the current winter heating season, the bulls got another disappointment as the EIA weekly inventory report was bearish versus market consensus and neutral at best versus the five year average," Energy Management Institute's Dominick Chirichella said in a report. Traders noted preliminary estimates for futures-only volume were pretty heavy at about 500,000 contracts. They said the final exchange tally to be released on Friday could top the high so far this year of 529,036 contracts hit on Feb. 7. Front-month gas futures on the New York Mercantile Exchange ended down 14.3 cents, or 4.3 percent, at $3.163 per million British thermal units after sinking late to an intraday low and five-week low of $3.135. Just prior to release of the weekly storage report at 10:30 a.m. (1530 GMT), the front month was trading at around $3.28. Gas prices this year had mostly been stuck in a trading range between $3.20 and $3.60, but chart traders noted that Thursday's selloff drove the front contract below key support at the double bottom in the $3.20 area. Most agreed today's weak close could point prices lower, but some said short covering on Friday ahead of a long holiday weekend could provide a brief break in downside momentum. NYMEX floor trading will be closed Monday for the Presidents' Day holiday. Some traders noted that current gas prices were low enough to prompt more utilities to switch from coal to gas to generate power, while hefty nuclear plant outages this week of more than 14,000 megawatts could boost gas demand further. Gas-fired units are typically used to offset any shut nuclear generation. After a fairly mild week this week, AccuWeather.com expects temperatures in the Northeast and Midwest, key gas consuming regions, to drop to below normal late this week and next week, as highs mostly slip into the 30s Fahrenheit range. Despite the colder outlook, many traders remained skeptical of any upside in prices with winter winding down, inventories still high and production flowing at or near an all-time peak. STORAGE DRAW ABOVE LAST YEAR, FIVE-YEAR AVERAGE While the weekly withdrawal fell short of expectations, some traders noted it came in well above the 113 bcf decline seen during the same week last year and slightly above the five-year average for that week of 154 bcf. The draw sharply widened the deficit relative to last year by 44 bcf to 270 bcf, or 10 percent below last year's record highs for that time. It trimmed 3 bcf from the surplus versus the five-year average, but still left storage relatively high at 348 bcf, or 16 percent, above that benchmark. Early withdrawal estimates for next week's inventory report range from 118 bcf to 154 bcf. That would be below the 155 bcf pulled from storage during the same week in 2012 and possibly below the five-year average decline for that week of 140 bcf. If drawdowns for the rest of winter match the five-year average pace, inventories will end March at 2.076 tcf, about 20 percent above normal but 16 percent below last year, when stocks finished a very mild heating season at a record high 2.48 tcf. DRILLING DECLINES, PRODUCTION FAILS TO SLOW Baker Hughes will issue its next drilling rig report on Friday. The company's dry gas rig count has fallen in four of the last five weeks and is hovering just above the 13-1/2 year low hit three months ago, but record production has shown no significant signs of slowing. EIA expects marketed gas production to hit a record high 70.02 bcf per day this year, the third straight annual record.
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