U.S. natgas futures edge higher ahead of long weekend

Fri Feb 15, 2013 9:23am EST

* Front month remains above recent 3-month low
    * Colder weather set to return this weekend, next week
    * Nuclear outages running well above normal levels
    * Coming Up: Baker Hughes gas drilling rig data Friday

    By Eileen Houlihan
    NEW YORK, Feb 15 (Reuters) - U.S. natural gas futures edged
higher early on Friday, with cold weather set to return to
consuming regions of the nation over the Presidents' Day holiday
weekend and next week.
    In addition, some traders noted nuclear power plant outages
remained well above normal, boosting near-term demand.
    But others said storage remains bloated and winter should be
winding down over the next month, adding weight to the downside.
    As of 9:16 a.m. EST (1416 GMT), front-month March natural
gas futures on the New York Mercantile Exchange were at
$3.177 per million British thermal units, up 1.4 cents, or less
than 1 percent.
    The front month contract tumbled more than 4 percent on
Thursday, after the release of bearish weekly inventory data.
The contract hit a 6-1/2 week high of $3.645 in late January
after touching a more than a three-month low of $3.05 in early
January. 
    Forecaster MDA Weather Services called for an "unsettled,
stormy pattern" with normal or below-normal readings over the
nation 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
Thursday, both again called for normal or below-normal
temperatures for the country.
    Nuclear outages totaled 14,100 megawatts, or 14 percent of
U.S. capacity, flat to Thursday's outages, but up from 12,100 MW
out a year ago and a five-year average outage rate of about
8,800 MW. 
    
    ANOTHER BELOW AVERAGE STORAGE DRAW 
    Data from the U.S. Energy Information Administration showed
total domestic inventories fell last week by 157 billion cubic
feet to 2.527 trillion cubic feet. 
    Most traders viewed the report as bearish, noting the draw
came in below Reuters poll estimates for a 162 bcf drop and
under market expectations for a third straight week.

    While stocks are nearly 10 percent below last year's record
levels, they are 16 percent above the five-year average level
for this time of year.
    Early withdrawal estimates for next week's inventory report
range from 118 bcf to 154 bcf, 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
    Traders awaited the next Baker Hughes gas drilling
rig report expected on Friday. Last week's data 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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