UPDATE 3-U.S. natgas futures rebound on winter heating demand

Fri Jan 3, 2014 2:59pm EST

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(Adds prices to close, change in market movement)

NEW YORK Jan 3 (Reuters) - U.S. natural gas futures closed down after fluctuating on Friday, as high winter heating demand was countered by a smaller than expected drop in stockpiles last week.

Natural gas stocks fell by 97 billion cubic feet during the week ending Dec. 27, according data from the Energy Information Administration released Friday morning, smaller than the 126 draw forecast in a Reuters poll.

The fall was smaller than the 126 bcf drop during the same week in 2012 and the five year average of 121 bcf.

Continued cold winter weather helped bolster futures, which rebounded into the positive by midday.

Front-month February gas futures on the New York Mercantile Exchange, dropped less than 2 cents to $4.304 per million British thermal units, rebounding from losses earlier of more than 2 percent.

"The weather forecast for the latter half of January doesn't look supportive, and we could see some more pressure, but I don't think the market is going to get aggressively short with this much winter left," said Gene McGillian, analyst at Tradition Energy in Stamford Connecticut.

In the ICE cash market, prices for weekend delivery at Henry Hub GT-HH-IDX, the benchmark supply point in Louisiana, rose 1 cent to $4.34, with late trade differentials at less than a 1 cent premium over NYMEX, the same as Thursday's premium.

Gas on the Transco pipeline at the New York citygate E-TSCO6NY-IDX fell 17.51 cents, recovering from supply constraints caused by a forecast for a cold snap in the region, to $13.61. In Chicago, gas at citygate MC-CHICIT-IDX rose $8.34 to $13.19.

(For daily ICE U.S. cash gas prices, click <0#GAS-IDX=ICE>)

Private forecaster MDA Weather Services called for cold, stormy weather to continue in the 1- to 5-day range, but moderate temperatures are expected in the 6- to 10-day range, followed by strong warmth in the East in the 11- to 15-day forecast.

Sub-zero temperatures accompanied a snow storm that has made its way through much of the Midwest and the Northeast in the second half of the week, causing some pipelines to reach capacity. Gas on the Transco pipeline at the New York citygate E-TSCO6NY-IDX was up $15.72 to $31.12 on Thursday.

Chilly early winter weather drove the front month contract up to finish last year with a 27 percent gain, making it the biggest gaining commodity of the year. The contract posted a 2-1/2-year high of $4.532 per million British thermal units on Dec. 23.

Last Friday's storage report from the U.S. Energy Information Administration showed total gas inventories fell the week ending Dec. 20 by 177 billion cubic feet to 3.071 trillion cubic feet. The report was delayed one day last week by the Christmas holiday.

Nuclear plant outages on Friday totaled 1,540 megawatts, or about 2 percent of U.S. capacity. That was down from Thursday's total of 1,600 MW, and well below the 7,500 MW out a year ago and the five-year average outage rate of 4,750 MW. (Reporting by Julia Edwards; Editing by Bernadette Baum, Meredith Mazzilli, Chris Reese and Andrew Hay)

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