UPDATE 3-U.S. natgas futures end up, front hits 6-week high on weather

Fri Mar 8, 2013 3:32pm EST

* Mild weekend ahead but cold returns later next week
    * Nuclear outages still running above normal


    By Joe Silha
    NEW YORK, March 8 (Reuters) - U.S. natural gas futures ended
higher on Friday for a second straight day, with the front-month
contract powered to another six-week peak amid fairly chilly
weather forecasts for next week that should stir more heating
demand.
    Cold late-winter weather has helped push the front contract
up more than 15 percent in the last three weeks, turning the
chart picture more supportive as prices broke through some key
moving-average and trendline resistance points.
    Traders also viewed Thursday's 146-billion-cubic-feet weekly
inventory decline as bullish, noting it was the third straight
week in which the draw came in above market expectations.
    But some expect further upside to be difficult with storage
still high, production flowing at or near a record peak and
milder spring weather likely soon to slow demand.
    "It's been pretty cold over the last month, but I think the
upside is limited. There's not enough time left (in winter), and
we're probably seeing the last round of heating demand," said
Jonathan Lee at Ecova Inc in Washington. 
    Front-month gas futures on the New York Mercantile
Exchange ended up 4.7 cents, or 1.3 percent, at $3.629 per
million British thermal units after climbing late to a six-week
high of $3.635. For the week, the nearby contract gained 5
percent following a 5 percent rise last week.
    Many technical traders still need a close above the 2013
high of $3.645 to turn bullish.
    After a brief late-week warm-up, traders noted there was
still some chilly weather in the extended forecast.
    MDA Weather Services, a private forecaster, noted that the
six- to 10-day outlook had turned slightly colder overnight,
particularly for the Midwest.
    Gas prices have also drawn support from more utilities using
gas for baseload power this year and from sizeable nuclear plant
outages that have prompted more gas burn. Gas-fired units are
typically used to offset shut nuclear generation.
   
    ANOTHER ABOVE-AVERAGE STORAGE DRAW
    U.S. Energy Information Administration data on Thursday
showed domestic gas inventories fell last week to 2.083 trillion
cubic feet. 
    While the weekly draw came in well above the five-year
average drop for that week of 107 bcf and sliced 39 bcf from the
surplus versus the five-year average, storage is still
relatively high at 269 bcf, or 15 percent, above that benchmark.
       
    Early withdrawal estimates for next week's inventory report
range from 88 bcf to 139 bcf. That would be well above the 66
bcf pulled from storage during the same week in 2012 and the
five-year average decline for that week of 74 bcf.
    A string of strong weekly withdrawals has prompted analysts
sharply to lower estimates for end-winter storage, with some
expecting inventories to drop to as low as 1.8 tcf, or just
about 4 percent above average.
    A Reuters poll in mid-January showed most analysts had
expected stocks to finish the heating season at about 2 tcf.
    So far this winter, nearly 500 bcf more gas has been pulled
from storage than last year at this time.
    
    RIGS DECLINE, OUTPUT SLOWING LITTLE
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell 13 this week to a nearly 14-year low of
407. 
    It was the fifth drop in six weeks, but production has not
slowed much, if at all, from the record high posted last year.
        
    The EIA expects marketed gas production in 2013 to hit a
record high for the third straight year.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.