UPDATE 3-Cold forecast lifts front US natgas futures for 2nd day
* Coal switching, nuclear plant outages lend some support * High inventories, record production keep buyers cautious * Coming Up: EIA, Enerdata natgas storage data Thursday By Joe Silha NEW YORK, Feb 20 (Reuters) - Front U.S. natural gas futures ended higher for a second straight day on Wednesday, backed by cold weather forecasts for much of the nation for the next two weeks that should force more homeowners and businesses to turn up their heaters. Traders also noted that gas prices were still low enough to prompt some utilities to switch from coal to gas to generate power, while hefty nuclear plant outages this week of more than 15,000 megawatts could boost gas demand further as colder weather drives up demand. Gas-fired units are typically used to offset any shut nuclear generation. "Any bit of cold right now will create some buying interest, and we also may be seeing a little short covering after the sell-off last week," said Jonathan Lee at Ecova Inc In Washington. Front-month gas futures on the New York Mercantile Exchange ended up 0.7 cent at $3.279 per million British thermal units after trading between $3.257 and $3.313. The nearby contract has gained 4 percent so far this week after sliding 3.6 percent last week. Forecaster Commodity Weather Group expects U.S. temperatures to mostly range from normal to below normal for the next two weeks, with some significant cold spreading south and east later in the period. But despite the fairly cold 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. LIGHT STORAGE DRAW EXPECTED Traders and analysts polled by Reuters expect inventories to have fallen 122 billion cubic feet last week when the U.S. Energy Information Administration releases its weekly storage report on Thursday. Stocks fell by an adjusted 155 bcf during the same week last year, while the five-year average draw for that week is 140 bcf. EIA data last week showed total gas inventories of 2.527 trillion cubic feet were 10 percent below last year's record highs at that time, but were still relatively high at 348 bcf, or 16 percent, above the five-year average. Storage draws have come in below market expectations for three straight weeks. 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. GAS DRILLING DECLINES FOR THIRD WEEK Baker Hughes data last week showed the gas-directed 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 hit three months ago, production has shown no significant signs 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. EIA expects marketed gas production in 2013 to hit a record high for the third straight year.
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