U.S. natgas futures edge higher early amid more cold

Mon Mar 4, 2013 9:16am EST

* Front month remains well above January three-month low
    * Cold weather on tap in long-term outlooks
    * Nuclear outages still running above normal

    By Eileen Houlihan
    NEW YORK, March 4 (Reuters) - U.S. natural gas futures edged
higher early on Monday, lifted by forecasts for continued cold
weather for most of the United States despite still bloated
inventories.
    As of 9:11 a.m. EST (1411 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.465 per million British thermal units, up 0.9 cent.
    The nearby contract rose 5 percent last week, its biggest
weekly run up in six weeks. It is up about 10 percent over the
last two weeks on the lingering cold weather.
    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 early in
the month. 
    Forecaster MDA Weather Services called for below-normal
readings across much of the country in its one to five-day
outlook, with the cold concentrated from the Midwest to the
South.
    The latest National Weather Service six to 10-day forecast
issued on Sunday called for below-normal temperatures for most
of the United States, with some above-normal readings on the
West Coast and in parts of New England.
    Nuclear outages totaled about 15,800 megawatts, or 16
percent of U.S. capacity, down from 19,200 MW out a year-ago but
up from a five-year average outage rate of about 13,300 MW.
 
    
    ABOVE-AVERAGE STORAGE DRAW
    U.S. Energy Information Administration data last week 
showed domestic gas inventories fell the prior week by 171
billion cubic feet to 2.229 trillion cubic feet. 
    The weekly draw came in well above the five-year average
drop for that week and storage is now 12 percent below last
year's record high levels, but it is also 16 percent above the
five-year average level.

    Withdrawal estimates for this week's storage report range
from 120 bcf to 160 bcf versus a 92 bcf draw in the same week in
2012 and a five-year average drop for that week of 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 for the fourth time in five weeks,
dropping by eight to 420. 

    The gas drilling rig count is hovering just above the
13-1/2-year low of 413 hit in early November, but production is
still high.
    EIA data last week showed that gross natural gas output in
December slipped slightly from November's record high, the first
time in four months that production failed to set a new peak. 
    But most analysts pegged the decline to cold weather in the
Southwest that likely froze wells and not producers
intentionally curbing dry gas flows.
    The EIA expects marketed gas production in 2013 to hit a
record high for the third straight year.
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