REFILE-New front-month May U.S. natgas futures hit 18-month spot high

Wed Mar 27, 2013 9:53am EDT

* Front month at highest mark since mid-September 2011
    * Nuclear outages still running above normal
    * Cold weather remains on tap in long-term forecasts

    By Eileen Houlihan
    NEW YORK, March 27 (Reuters) - U.S. natural gas futures rose
more than 1 percent early on Wednesday, with the new front-month
May contract reaching its highest mark in more than 18 months,
amid lingering cold weather in consuming regions of the nation.
    Cold weather has put a huge dent in inventories and helped
drive gas futures up 25 percent since mid-February.
    Above-normal nuclear power plant outages have also increased
demand for gas-fired replacement power and underpinned price
gains.
    But some traders said gas was due for a pullback, with
winter-like weather winding down and with the nearby contract
failing to close above $4 per million British thermal units
after poking through that level last week.
    As of 9:23 a.m. EDT (1323 GMT), May natural gas futures on
the New York Mercantile Exchange were at $4.052 per
mmBtu, up 6.1 cents, or more than 1 percent, after rising as
high as $4.078 in electronic trade, the highest mark for a spot
contract since mid-September 2011.
    Forecaster MDA Weather Services, in its one to five-day
outlook, called for normal or below-normal temperatures for a
little more than the eastern half of the country, with
above-normal readings in the West.
    The National Weather Service's latest six to 10-day
forecast, issued on Tuesday, also called for below-normal
readings in the East and above-normal readings in the West.
    Nuclear outages totaled 21,800 megawatts, or 22 percent of
U.S. capacity, down from 21,900 MW out on Tuesday and 22,100 MW
out a year ago, but up from a five-year average outage rate of
19,400 MW. 
    
    INVENTORY DRAW FALLS SHORT OF EXPECTATIONS
    Last week's data from the U.S. Energy Information
Administration showed total domestic gas inventories fell in 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 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, compared with a 45-bcf
build during the same week last year and a five-year average
increase for the week of 6 bcf.
    Baker Hughes data last week 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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A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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