UPDATE 4-U.S. natgas futures end down, EIA production data weighs

Tue Apr 30, 2013 5:32pm EDT

* EIA monthly gross gas production data pressures prices
    * Cool late-week outlook for Texas and the Midwest
    * Nuclear power plant outages climb back above average
    * Coming up: Reuters natural gas storage poll Wednesday


    By Joe Silha
    NEW YORK, April 30 (Reuters) - U.S. natural gas futures
ended lower on Tuesday, pressured as investors took profits
after the previous session's 4 percent gain, and as a government
report showed gross gas production climbed in February after two
straight monthly declines.
    Traders noted that gas prices hit new lows at midday after
the U.S. Energy Information Administration production report,
but some said expectations for another light weekly inventory
build on Thursday and cooler late-week weather forecasts,
particularly for the Midwest, may have limited selling.
    "I think we were correcting from yesterday's gain, a little
profit taking, but temperatures still look below average for the
middle part of the country which is keeping prices supported," a
Pennsylvania-based cash trader said.
    Temperatures in the Midwest and Texas were expected to sink
far below normal levels this week, again kicking up heating
demand. An unexpectedly chilly April has helped slow storage
injections early in the stock building season.
    Front-month gas futures on the New York Mercantile
Exchange ended down 4.9 cents, or 1.1 percent, at $4.343 per
million British thermal units after sliding to an intraday low
of $4.322 after the EIA report.
    For the month of April, front-month gas futures gained 7.9
percent, their third straight monthly gain but well below the 15
percent rise posted in March. The front contract slid nearly 6
percent last week, its first weekly decline in 10 weeks. It hit
a 21-month high of $4.429 on April 18.
    Last week's slide came as new longs in the market opted to
take profits ahead of milder weather expected in May that should
slow space heating needs.
    Technical traders said gas prices seemed to be stalling
after the uptrend that had been in place since mid-February.
They said several recent advances have failed to boost the front
contract past the high from two weeks ago.
    After a strong cold shot this week from Plains states to
Texas, MDA Weather Services said the six-to-10-day forecast
turned warmer from the eastern Midwest to the Northeast.
    Traders also noted that gas prices at current levels were
likely curbing demand by prompting more utilities to use coal
rather than gas for power generation and increasing supply by
encouraging producers to turn on more wells.
        
    PRODUCTION GAINS DESPITE RECENT RIG DECLINES
    EIA data on Tuesday showed gross natural gas production in
February climbed for the first time in three months. Output rose
to about 1.27 billion cubic feet per day, or 1.8 percent, above
the same month last year after dropping below year-ago levels in
January for the first time since 2010. 
    The report dimmed prospects that record high production
would slow anytime soon despite the fact that the Baker Hughes
gas drilling rig count has dropped to a 14-year low.
 

    The EIA recently estimated that marketed gas output in 2013
will hit a record high for the third straight year. 
    
    ANOTHER LIGHT INVENTORY BUILD EXPECTED 
    EIA reported last week that total domestic gas inventories
rose by 30 bcf to 1.734 trillion cubic feet. That was below the
Reuters poll estimate of 32 bcf and well below the five-year
average increase of 50 bcf for that week. 
    The stock-building season got off to a slow start, with only
two injections reported so far after an unusually cold spring
forced homeowners and businesses to use more gas for heating.
    Inventories now stand at about 807 bcf, or 32 percent, 
below last year's record highs at this time, and 94 bcf, or 5
percent, below the five-year average.

    Early injection estimates for Thursday's EIA report range
from 24 to 40 bcf versus a 31-bcf build a year earlier and a
five-year average rise for that week of 67 bcf.
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