* Front month up from Monday's lowest mark since Feb. 2002
* Mild weather on tap for much of the nation
* US crude futures also little change early
* Coming Up: EIA natgas storage data Thursday
NEW YORK, April 5 U.S. natural gas futures were
little changed in early trading Thursday as the market awaited
direction from government storage data due out later this
morning after sliding early this week to a 10-year low.
Most traders expect another modest build to already record
high inventories, far more bearish in comparison to the usual
drawdown from storage at this time last year.
In addition, the cooler weather of early this week was
expected to moderate over much of the nation in the coming days,
further dampening demand.
Front-month May natural gas futures on the New York
Mercantile Exchange were at $2.133 per million British
thermal units in early activity, down 0.8 cent. They hovered
above Monday's $2.069 which marked the lowest price for a front
month contract since February 2002.
While technical traders said the market was oversold and due
for a bounce after sliding nearly 7 percent, few expected much
of one, with the moderating weather outlook expected to limit
any late heating or early cooling loads.
The front month lost 19 percent in March, its biggest
monthly drop since August 2010. The contract also shed 29
percent from January to March to post in the biggest quarterly
decline in two years.
EIA data last week showed total gas inventories rose to
2.437 trillion cubic feet, driving stocks further into record
territory for this time of year and sharply widening the already
huge surpluses to year-ago and the five-year average.
(Storage graphic: link.reuters.com/mup44s)
Injection estimates for this week's EIA report ranged from
10 bcf to 45 bcf with most traders and analysts expecting data
to show a build of about 32 bcf when it is released today at
about 10:30 a.m. EDT, a Reuters poll showed.
Storage fell an adjusted 29 bcf in the same week last year
and on average over the past five years has gained 8 bcf for
Utilities typically build inventories from April through
October to help meet peak winter heating needs, but builds this
year started two weeks earlier than usual, and storage is set to
finish the month near 2.5 tcf, about 60 percent above normal and
easily above the previous record of 2.148 tcf set in 1983.
The inventory surplus will provide a hefty cushion to meet
any spikes in demand or storm-related disruptions in supply this
year. It is expected to grow further in coming weeks, at least
until stronger air conditioning demand slows builds.
PRODUCTION NOT EXPECTED TO SLOW SOON
Baker Hughes data last week showed the gas-directed rig
count rose for the first time in 12 weeks to 658. The count hit
a 10-year low of 652 the prior week.
(Rig graphic: r.reuters.com/dyb62s )
The steady drop in dry gas drilling this year -- the gas
count is still down nearly 30 percent since peaking at 936 in
mid-October -- had stirred expectations that low prices would
finally force producers to curb gas output and tighten supplies.
But the drop has yet to be reflected in pipeline flows,
which are still estimated to be at or near record high levels,
primarily due to rising output from shale.
U.S. Energy Information Administration production data last
week offered little hope for bulls, with January gross gas
output climbing to a record of 72.85 billion cubic feet per day,
eclipsing the previous peak of 72.68 bcfd in November.
The slight drop the agency reported for December, the first
measurable decline since well freeze offs curbed output in
January and February 2011, had raised expectations that
producers might finally be curtailing output.
Some analysts say the gas-directed rig count may have to
drop below 600 to reduce flowing supplies significantly. Most
analysts do not expect any major slowdown in gas output until
later this year.
(Reporting by Eileen Houlihan; Editing by John Picinich)