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US natgas hovers near 10-year spot low under $2/mmBtu
April 20, 2012 / 1:30 PM / 6 years ago

US natgas hovers near 10-year spot low under $2/mmBtu

* Front month ties Thursday's 10-year spot chart low
    * Milder spring weather on tap for much of the nation
    * U.S. crude futures rise $2/barrel early
    * Coming Up: Baker Hughes gas drilling rig data Friday

    By Eileen Houlihan	
    NEW YORK, April 20 (Reuters) - U.S. natural gas futures were
little changed in early trading Friday, hovering near Thursday's
10-year spot chart low under $2 per million British thermal
units as mild spring weather and record supplies hung over the
market.	
    Some traders said natural gas was oversold and due for a
bounce after losing 10 percent this month. But others expected
few gains in the near term until hotter weather arrives to kick
up air conditioning loads.	
    Front-month May natural gas futures on the New York
Mercantile Exchange were at $1.919 per mmBtu, up 1.2
cents, after sliding to $1.902 which tied Thursday's low and
their cheapest price since January 2002.	
	
    RECORD INVENTORIES  	
    U.S. Energy Information Administration on Thursday reported 
total gas inventories rose 25 billion cubic feet to 2.512
trillion cubic feet, in line with Reuters poll estimates.
 	
    That showed stocks remained at record highs for this time of
year, standing 53 percent above last year and about 58 percent
above the 5-year average level.	
 (Storage graphic: link.reuters.com/mup44s)   	
    Early injection estimates for next week's EIA storage report
range from 35 bcf to 75 bcf versus a year-ago gain of 35 bcf and
a five-year average build of about 47 bcf for that week.	
    If weekly stock builds through October match the five-year
average pace, inventories would top out at 4.594 tcf, or about
11 percent above peak estimated capacity of about 4.1 tcf.	
    That could sink prices later in the injection season if
storage caverns fill up and force more gas into a well-supplied
market.    	
        	
    PRODUCTION ALSO NEAR RECORD HIGHS	
    The EIA's short-term energy outlook last week also offered
little hope for bulls, with the agency sharply raising its
estimate for marketed gas production this year for a third
straight month. 	
    EIA also forecast a significant 2.8 bcf per day, or 4.3
percent, gain in consumption this year, primarily due to more
utilities switching from pricier coal to cheaper gas, but it was
not expected to be enough to tighten an over supplied gas
market.
    Production growth is expected to slow this year as low
prices hit plans for new drilling, but the sharp decline in the
Baker Hughes gas rig count -- down a third since peaking at 936
in October -- has not yet reduced output partly due to increased
drilling efficiency.    	
    The gas-directed rig count has fallen in 13 of the last 14
weeks, sinking on Friday to its lowest level in 10 years, but
rising output from shale has kept production on an upward track.	
    (Rig graphic: r.reuters.com/dyb62s)	
                   	
    MORE FUNDAMENTALS	
    The National Weather Service's six- to 10-day outlook issued
on Thursday again called for above-normal readings for much of
the mid-Continent and below-normal readings only along both
coasts.	
    Spring nuclear power plant outages were running at about
24,700 megawatts, or 24 percent, on Friday, down from about
28,900 MW out a year ago and near flat with the five-year outage
rate of about 23,500 MW. 	
    Drought conditions in Pennsylvania forced at least one
natural gas driller to scale back production as of Thursday as
companies were told to temporarily suspend withdrawing water
needed for drilling in certain areas. 	
      	
	
 (Reporting by Eileen Houlihan; Editing by John Picinich)

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