U.S. natgas futures edge higher ahead of EIA storage data

Thu Mar 7, 2013 9:33am EST

* Front month below Tuesday's six-week high
    * Cold weather still on tap in long-term outlooks
    * Nuclear outages running above normal
    * Coming Up: EIA natgas storage data on Thursday

    By Eileen Houlihan
    NEW YORK, March 7 (Reuters) - U.S. natural gas futures edged
higher on Thursday, climbing amid continued cold weather and
ahead of weekly government storage data expected to show a large
withdrawal from winter inventories.
    The U.S. Energy Information Administration said it would
release weekly natural gas inventory data at its usual time of
10:30 a.m. EST (1530 GMT) on Thursday despite a fierce winter
snowstorm that shut down government offices in Washington.
    Industry analysts expect weekly data to show a withdrawal of
about 134 billion cubic feet when the data is released,
according to a Reuters poll, above the year-ago draw of 92 bcf
and a five-year average drop of 107 bcf for that week.
  
    As of 9:20 a.m. EST (1420 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.499 per million British thermal units, up 2.9 cents, or less
than 1 percent.
    The nearby contract rose Tuesday to a six-week high of
$3.594 before closing lower on Wednesday.
    Cold late-winter weather had helped push the front contract
up about 12 percent in a little over two weeks and turned the
chart picture more supportive, but the close below $3.50 on
Wednesday had some traders saying that could signal an end to
the recent uptrend.
    Forecaster MDA Weather Services called for normal or
below-normal readings across the country in its one to five-day
outlook.
    The latest National Weather Service six to 10-day forecast
issued on Wednesday again called for below-normal temperatures
for a little more than the eastern half of the nation, with
normal or above-normal readings in the West.
    Nuclear outages totaled about 14,800 megawatts, or 15
percent of U.S. capacity, down from 15,000 MW out on Wednesday
and 17,800 MW out a year-ago, but up from a five-year average
outage rate of about 13,900 MW. 
    
    ABOVE-AVERAGE STORAGE DRAW
    Last week's EIA gas storage report showed domestic
inventories fell the prior week by 171 bcf to 2.229 trillion
cubic feet. 
    The weekly draw came in well above the five-year average
drop for that week and storage is 12 percent below last year's
record high levels, but it is also 16 percent above the
five-year average level.

    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 COULD BE STARTING TO SLOW
    Traders were awaiting the next Baker Hughes gas
drilling rig report to be released on Friday. Data last week
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.
    Also the EIA said last week 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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