UPDATE 3-U.S. natgas futures end lower ahead of holiday weekend

Fri Feb 15, 2013 3:30pm 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: CFTC futures trade data Friday


    By Eileen Houlihan
    NEW YORK, Feb 15 (Reuters) - U.S. natural gas futures ended
lower for a second straight session on Friday, closing out the
week down nearly 4 percent ahead of the Presidents Day holiday
weekend.
    Despite forecasts that cold weather will return to consuming
regions over the weekend and next week and that nuclear power
plant outages will be above normal, bloated inventories and the
approaching end of winter added weight to the downside.
    Thomson Reuters Natural Gas Analytics data showed heating
degree days would remain above normal for the next two weeks,
with some overnight models showing upward changes in demand over
the first two weeks of March.
    Degree days are a measure of departure in the mean daily
temperature from 65 degrees Fahrenheit (18 degrees Celsius) and
are used to estimate demand to heat or cool homes and
businesses.
    "Trading after yesterday's sell-off continues to suggest
that the bulls are getting tired of waiting for a winter price
surge and are gradually in the process of moving to the
sidelines," said Energy Management Institute's Dominick
Chirichella.
    Front-month March natural gas futures on the New York
Mercantile Exchange slid 1 cent to settle at $3.153 per
million British thermal units, after trading between $3.125 and
$3.194.
    The contract slid 11.9 cents, or nearly 4 percent, on the
week.
    The front month contract, which tumbled more than 4 percent
Thursday following the release of bearish weekly inventory data,
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.
    NYMEX floor trading will be closed Monday for the Presidents
Day holiday, but electronic trading will continue.
    Traders noted that futures-only volume for trade-day
Thursday, released on Friday, exceeded 531,500 contracts, the
highest so far this year, topping the 529,036 contracts traded
on Feb. 7.
    In the cash market, gas for delivery through Tuesday at the
NYMEX benchmark Henry Hub in Louisiana fell 11 cents
to average $3.19, with late deals easing to 9 cents over the
front month, from deals done late Thursday at a 12-cent premium.
    Gas on the Transco pipeline at the New York citygate , however, jumped nearly $10 on the colder weekend
forecast, to $14.75.
    Forecaster MDA Weather Services, in its one- to five-day
outlook, called for an "unsettled, stormy pattern" with normal
or below-normal temperatures over the nation.
    Its six- to 10-day forecast, as well as the latest National
Weather Service six- to 10-day forecast issued on Thursday,
called for normal or below-normal temperatures for most of the
country.
    Nuclear outages totaled 14,100 megawatts, or 14 percent of
U.S. capacity, unchanged from Thursday 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 on
Thursday 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 was
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
    Baker Hughes data on Friday showed the gas drilling
rig count fell for the fifth time in six weeks, dropping by four
to 421. 
    But while the gas rig count is hovering not far above the 
13-1/2 year low of 413 reported 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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