U.S. natgas futures edge higher ahead of contract expiry

Tue Mar 26, 2013 9:32am EDT

* Front month remains under last week's 18-month high
    * Nuclear outages still running above normal
    * Some cold weather on tap in long-term forecasts

    By Eileen Houlihan
    NEW YORK, March 26 (Reuters) - U.S. natural gas futures
edged higher early on Tuesday, but remained under last week's
18-month spot chart high ahead of the front month's expiration
later in the day.
    Cold late-winter weather helped drive a string of supportive
storage withdrawals, pushing gas futures up about 25 percent in
the past five weeks.
    Above-normal nuclear power plant outages have also increased
demand for gas-fired replacement power and underpinned price
gains.
    The nearby contract broke through several key resistance
levels on its run-up from a five-week low of $3.125 per million
British thermal units hit in mid-February.
    But technical traders said the front contract was due for a
pullback ahead of Tuesday's expiration and with winter winding
down. The contract failed to close above the $4 level after
poking through it last week.
    As of 9:19 a.m. EDT (1319 GMT), front-month April natural
gas futures on the New York Mercantile Exchange were at
$3.891, up 2 cents, or less than 1 percent, after rising to
$4.025 last week, the highest mark for a spot contract since
September 2011.
    Forecaster MDA Weather Services called for below or
much-below-normal temperatures for about the eastern half of the
country in its one to five-day outlook, with the cold
concentrated in the Southeast.
    The National Weather Service's latest six to 10-day forecast
issued on Monday called for below-normal readings in the Midwest
and Northeast and some above-normal readings in the West and
South Texas, with near-normal temperatures on tap for the
Southeast.
    Nuclear outages totaled 21,900 megawatts, or 22 percent of
U.S. capacity, down from 22,500 MW out on Monday, but up from
21,600 MW out a year ago and a five-year average outage rate of
about 18,400 MW. 
    
    INVENTORY DRAW FALLS SHORT OF EXPECTATIONS
    Last week's data from the U.S. Energy Information
Administration showed total domestic gas inventories fell the
prior week by 62 billion cubic feet, below Reuters poll
estimates for a 70 bcf draw. 
    It was the first time in five weeks that the weekly draw
fell short of expectations.
    Domestic gas inventories are now at 1.876 trillion cubic
feet, more than 21 percent below last year's record high for
this time of year, but about 10 percent above the five-year
average.

    Stocks seem on track to end the heating season below 1.8
tcf, or just 3 percent above average. A Reuters poll in
mid-January showed most analysts had expected stocks to finish
the winter at about 2 tcf.
    Early withdrawal estimates for this week's inventory report
range from 59 bcf to 103 bcf versus, a 45-bcf build during the
same week last year and a five-year average increase for that
week of 6 bcf.
    Baker Hughes data on Friday showed the gas-directed
drilling rig count fell by 13 to 418, hovering just above the
recent 14-year low of 407 posted three weeks ago.
 

    While the EIA recently lowered its growth forecast for 2013,
it still expects marketed gas production to hit a record high
for the third straight year.
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