UPDATE 3-U.S. natural gas futures seesaw ahead of weekend

Fri Mar 1, 2013 3:22pm EST

* Milder weather outlook keeps buyers cautious
    * Aggregate inventories remain high, weigh on sentiment


    By Joe Silha
    NEW YORK, March 1 (Reuters) - U.S. natural gas futures ended
lower on Friday after a seesaw session, with prices pressured by
some computer weather predictions that show milder weather
ahead.
    Cold forecasts have helped drive the front contract up about
10 percent over the last two weeks. 
    Traders also viewed Thursday's above-average weekly
inventory decline as price-supportive, noting it was the second
straight week in which the draw came in above expectations. Most
expect another strong pull in next week's report.
    But despite some near-term cold, traders noted the extended
outlook seemed to be moderating and few expect much upside in
prices with winter winding down, storage still high and
production flowing at or near a record peak.
    "In the last two or three days, weather models have been
flipping around, but it looks like we're going to see the end of
this cold snap over the next week or so. Prices could pull back
if weather turns milder," said Steve Mosley at The SMC Report.
    Front gas futures on the New York Mercantile Exchange
ended down 3 cents, or 0.9 percent, at $3.456 per million
British thermal units, after trading between $3.44 and $3.52.
For the week, the nearby contract gained 5 percent, its biggest
weekly run up in six weeks.
    Prices have drawn support recently from utilities switching
from coal to cheaper gas for power generation and from sizeable
nuclear plant outages that have prompted more gas burn.
    Gas-fired units are typically used to offset any shut
nuclear generation. 
    MDA Weather Services noted that the six- to 10-day outlook
had turned slightly warmer again from the central to eastern
United States, but the private forecaster still expects a brief
shot of cold air to hit the Midwest in the 11- to 15-day period.
    
    ABOVE-AVERAGE STORAGE DRAW
    U.S. Energy Information Administration data on Thursday
showed domestic gas inventories fell last week by 171 billion
cubic feet to 2.229 trillion. 
    The weekly draw came in well above the five-year average
drop for that week of 118 bcf and sliced 53 bcf from the surplus
versus the five-year average, but traders noted storage is still
relatively high at 308 bcf, or 16 percent, above that benchmark.
    
    Withdrawal estimates for next week's storage report range
from 120 bcf to 160 bcf. Stocks fell by 92 bcf in the same week
in 2012. The five-year average drop for that week is 107 bcf.
    Most analysts expect storage to end the heating season at
about 2 tcf, or 16 percent above average but 19 percent below
last winter's record-high finish of 2.48 tcf. 
    
    OUTPUT STARTS TO SLOW?
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell this week for the fourth time in five
weeks, dropping by eight to 420.
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