UPDATE 3-U.S. natgas futures fall for 4th day, April to expire Tuesday

Mon Mar 25, 2013 4:08pm EDT

* Nuclear outages still running above normal
    * Chilly weather to continue into early April


    By Joe Silha
    NEW YORK, March 25 (Reuters) - Front-month U.S. natural gas
futures ended lower on Monday for a fourth straight session,
pressured by profit-taking after upside momentum stalled ahead
of key resistance despite cold weather that should force
homeowners and businesses to turn up the heat.
    Cold weather has put a huge dent in inventories and helped
drive futures up about 25 percent in the previous five weeks.
Above-average nuclear plant outages have also increased demand
for gas-fired replacement power and underpinned price gains.
 
    But technical traders said the front contract was due a
pullback, particularly ahead of Tuesday's expiration and after
failing to close above key resistance at $4 per million British
thermal units despite poking through that level several times
last week.
    "Mother Nature turned really bullish in mid-February and
everyone got long, but that's been priced in now and it's going
to warm up eventually," said Kyle Cooper, managing partner at
IAF Advisors in Houston.
    April natural gas futures on the New York Mercantile
Exchange ended down 6.2 cents, or 1.6 percent, at $3.865 per
mmBtu after trading between $3.86 and $3.996.
    The front-month contract, which posted an 18-month high of
$4.025 on Thursday, has gained for five straight weeks but lost
2.6 percent in the last four sessions.
    Some traders said the market may be losing upward momentum,
particularly with production flowing at or near an all-time peak
and mild spring weather likely to slow demand later next month.
    In addition, gas prices above $4 could curb demand by
prompting some utilities to use more coal to generate power and
increase supply by encouraging producers to turn on more wells.
    Commodity Weather Group expects a seasonal to cool pattern
to linger for the next week or so, but weather in early April
was not expected to be as cold as the readings in late March.

    RIGS CLIMB, OUTPUT NOT SLOWING MUCH 
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell last week for the third time in four
weeks, dropping by 13 to 418.
    The count is hovering just above the 14-year low of 407
posted two weeks ago, but production has not slowed much, if at
all, from the record high posted last year.    

    The Energy Information Administration still expects marketed
gas production in 2013 to hit a record high for the third year. 
    
    STRONG STORAGE DRAW EXPECTED
    U.S. EIA data last week showed domestic gas inventories for
the week that ended March 15 fell by 62 billion cubic feet to
1.876 trillion cubic feet. 

    Most traders viewed the decline as bearish, noting it fell
short of market expectations for the first time in five weeks. 
A Reuters poll had forecast a 70-bcf draw.
    The drop did cut 36 bcf from the surplus versus the
five-year average, but storage is 162 bcf, or 9 percent, above
that benchmark.
    Most traders expect that surplus to shrink sharply in
Thursday's inventory report, with early withdrawal estimates
ranging from 59 to 103 bcf. Stocks rose 45 bcf in the same week
last year, while storage normally gains by 6 bcf that week.
    Stocks will likely end the heating season just above the
1.73-tcf average for March 31. Storage began the winter above
3.9 tcf, and a Reuters poll in mid-January showed most analysts
expected stocks to finish the season at about 2 tcf.
    Gas pulled from storage so far this winter is about 2.050
tcf, roughly 580 bcf, or 39 percent, more than the same time
last year and nearly 5 percent above normal.
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