Profit taking weighs on US natgas futures ahead of EIA stocks data
NEW YORK, Feb 21 (Reuters) - Front-month U.S. natural gas futures slipped slightly early on Thursday, pressured by profit taking after two straight days of gains and ahead of what should be a bearish weekly inventory report later this morning. But despite the pullback, traders said chilly forecasts for the Northeast and Midwest for the next week or more should stir more heating demand and help limit the downside. In addition, they 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 about 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. At 9:05 a.m. EST (1405 GMT), front-month gas futures on the New York Mercantile Exchange were down 3.9 cents, or 1.2 percent, at $3.24 per million British thermal units after trading between $3.231 and $3.283. The nearby contract had gained 4 percent in the previous two sessions after losing 3.6 percent last week. AccuWeather.com expects temperatures in the Northeast and Midwest, key gas consuming regions, to range from normal to below normal for the next week, with overnight lows holding in the 20s and low-30s Fahrenheit during the period. But even with supportive weather ahead, many traders remained skeptical of any upside in prices with winter nearly over, inventories still high and production flowing at or near an all-time peak. LIGHT STORAGE DRAW EXPECTED Weekly inventory draws have come in below market expectations for three straight weeks and that trend may continue in Thursday's U.S. Energy 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. PRODUCTION FAILS TO SLOW DESPITE RIG DECLINES Baker Hughes will issue its next drilling rig report on Friday. While the company's dry gas rig count has fallen in five of the last six weeks and is hovering just above a 13-1/2 year low hit three months ago, record high production has shown no significant signs of slowing. EIA expects marketed gas production in 2013 to hit a record high for the third straight year.