UPDATE 3-U.S. natgas futures end up nearly 4 pct on more cold

Tue Feb 19, 2013 3:05pm EST

* Front month remains above recent three-month low
    * Colder weather in consuming regions this week
    * Cold on tap for the West next week
    * Nuclear outages running well above normal levels


    By Eileen Houlihan
    NEW YORK, Feb 19 (Reuters) - U.S. natural gas futures rose
nearly 4 percent on Tuesday, lifted by the return of weekday
industrial demand after the long Presidents Day holiday weekend
and by forecasts for continued cold weather in consuming regions
of the nation.
    "The natural gas market is staging a price recovery as
updated temperature forecasts point to above average heating
demand through the week ending March 8," said Citi Futures
energy specialist Tim Evans.
    Thomson Reuters Natural Gas Analytics data showed heating
degree days over the next two weeks were "significantly above
normal," especially for the western two-thirds of the country.
    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.
    In addition, nuclear power plant outages remained well above
normal, boosting near-term demand.
    But some traders expect bloated inventories and the
impending end of winter to add weight to the downside.
    Front-month March natural gas futures on the New York
Mercantile Exchange rose 11.9 cents, or 3.77 percent, to
settle at $3.272 per million British thermal units. The contract
traded between $3.135 and $3.279.
    The front month slid about 4 percent in total last week
despite the colder weather outlook. 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.
    Other months ended higher as well, with the April contract
 gaining 11.3 cents, or also more than 3 percent, to
finish as $3.331 and summer months rising about 10 cents each.
    In the cash market, gas for Wednesday delivery at the NYMEX
benchmark Henry Hub in Louisiana rose 4 cents to
$3.23, with late deals easing to 3 cents over the front month
from deals done late Friday at a 9-cent premium.
    Gas on the Transco pipeline at the New York citygate was up 25 cents at $15.
    Forecaster MDA Weather Services called for a "chilly,
unsettled pattern" with mainly below-normal readings over much
of the nation in its one- to five-day outlook. 
    Its six- to 10-day forecast, as well as the latest National
Weather Service six- to 10-day forecast issued on Monday, called
for below-normal temperatures across the West and mostly
above-normal readings in the East.
    Nuclear outages totaled about 15,300 megawatts, or 15
percent of U.S. capacity, up from 14,100 MW out on Friday,
12,000 MW out a year ago, and a five-year average outage rate of
about 9,800 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 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 this week's inventory report
range from 118 bcf to 126 bcf, below the 155 bcf pulled from
storage during the same week in 2012 and the five-year average
decline for the 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.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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