(Rewrites top, adds analyst's quote, updates to settlement price)
By Jeanine Prezioso
NEW YORK Jan 7 U.S. natural gas prices ended flat on Tuesday supported by frigid cold that boosted heating demand but capped by forecasts for warmer temperatures by week's end in major cities.
Gas prices traded higher for much of the session on Tuesday as an arctic chill gripped most of the nation and triggered a sharp increase in heating demand.
A mass of freezing air descended on the eastern two-thirds of the country, pushing heating demand for natural gas to record highs, filling pipelines to capacity and forcing electricity providers to declare supply emergencies.
The U.S. was set to burn 131 billion cubic feet (bcf) of gas on Tuesday, a record for a single day and about 30 percent more than normal, eclipsing the record set on Monday, according to Thomson Reuters Analytics.
Heating degree days, the difference between an average day's temperature and 65 F (18 Celsius), which measure heating demand, were 45.4, the most in at least five years, according to Thomson Reuters Analytics.
Several gas pipeline operators warned customers of a pinch in supply on Tuesday. Analysts pointed to gas freeze-offs that caused a decline of about 1.5 bcf per day over the last day or so in gas-producing regions across the U.S.
After frigid weather on Tuesday, temperatures were expected to gradually rise into the 30s Fahrenheit (-6 Celsius) by week's end in New York, Chicago and Minneapolis, according to forecasters at AccuWeather.com, curbing some need for heating demand. By Saturday a high of 51 F was expected in New York, AccuWeather.com predicted.
Front-month February natural gas futures prices on the New York Mercantile Exchange ended virtually flat at $4.299 per million British thermal units (mmBtu), after rising to a session high of $4.43.
"I think we're seeing a battle waged between those who think seasonal demand will fall off at the end of month and those focused on the cold today and the cold during the last four weeks," said Gene McGillian, energy analyst with Tradition Energy in Stamford, Connecticut.
Prices had earlier been buoyed by forecasts for another possible record draw from underground storage next week, the second inside a month. Traders focused on the fact that the severe winter weather would put a dent in storage still early in the winter season.
"The storage for next week is pretty impressive, it looks like another record," said Ben Smith, president of consultancy First Enercast in Denver.
U.S. stockpiles of natural gas fell by 285 bcf, a record amount, in the second week of December.
Storage drawdowns of natural gas during the week to Jan. 3 will be released Thursday by the U.S. Energy Information Administration. Early estimates from analysts ranged from a draw of 140 bcf to 230 bcf. For the equivalent week last year, 191 bcf of gas were taken out of storage to meet demand and the five-year average for that week is a 131 bcf draw.
While next-day gas prices in the Northeast fell from Monday's 12-year high above $50 per million British thermal units, they remained bolstered by the cold. Natural gas for Wednesday delivery on the Transco pipeline at the New York citygate E-TSCO6NY-IDX eased to $28 per mmBtu, on average, in final trade.
At Henry Hub GT-HH-IDX, the benchmark supply point in Louisiana, gas rose 4 cents to $4.54 per mmBtu. Late differentials were at a 25-cent premium to the futures price, strengthening over Monday's premium of 20 cents.
Power prices meanwhile shot higher as grid operators struggled to meet demand. Power prices in central U.S. markets topped $1,500 per megawatt hour on Tuesday, far higher than monthly averages of around $50 for this time of year.
PJM, the power grid agency for the mid-Atlantic and parts of the Midwest, and Ercot, the Texas electricity grid operator, urged customers to conserve power due to forecasts for high heating demand as they both reached record demand for power.
Nuclear plant outages on Tuesday totaled 4,500 megawatts, or about 5 percent of U.S. capacity, higher than Monday's total of 1,860 MW, also pressuring gas-fired units to run and replace nuclear power.
(Reporting by Jeanine Prezioso, Julia Edwards and Scott DiSavino in New York.; Editing by Lisa Von Ahn, Edward McAllister and Meredith Mazzilli)