November 8, 2012 / 2:32 PM / 5 years ago

U.S. natgas futures edge lower ahead of weekly storage data

* Front month still well below last week's 2012 peak
    * More than 670,000 on East Coast lack power post-Sandy
    * Nuclear power plant outages remain high
    * Coming up: EIA natgas storage data Thursday

    By Eileen Houlihan
    NEW YORK, Nov 8 (Reuters) - U.S. natural gas futures edged
lower early on Thursday, extending losses for a second straight
day, as milder weather on tap in long-term outlooks and
expectations for another healthy build to already record high
inventories weighed.
    Most traders and analysts expect weekly data from the U.S.
Energy Information Administration to show a build of about 27
billion cubic feet when it is released today at 10:30 a.m. EST
(1530 GMT), a Reuters poll showed. 
    Stocks rose an adjusted 48 bcf in the same week last year,
while the five-year average build for that week is 36 bcf.
    While some pessimism remained over prospects for U.S.
economic growth after President Barack Obama's re-election, 
some traders said cold near-term weather in the Northeast and a
large number of nuclear power plants still offline for
maintenance could limit more downside.
    More than 670,000 customers in the Northeast remained
without power as of late Wednesday, more than a week after
Hurricane Sandy knocked down power lines across the region.
    Nuclear plants that shut due to floodwaters during the storm
had returned to service, but a number remained out for autumn
refueling, a factor that has supported gas prices as utilities
replace lost nuclear generation with gas-fired units.
    Nuclear outages totaled about 26,900 megawatts, or 27
percent of U.S. capacity, down from 27,800 MW out on Wednesday,
but up from 18,200 MW out a year ago and a five-year outage rate
of about 22,700 MW. 
    As of 9:15 a.m. EST (1415 GMT), NYMEX front-month December
natural gas futures were at $3.532 per million British
thermal units, down 4.6 cents, or just over 1 percent.
    The contract rose to $3.82 early last week, the highest
level for a front month since November 2011.
    Despite the near-term cold in the Northeast, the National
Weather Service six-to-10-day outlook issued on Wednesday called
for above-normal temperatures for much of the eastern half of
the nation and below-normal readings in much of the West.
           
    RECORD INVENTORIES
    EIA data last week showed domestic natural gas inventories
rose the previous week by 65 bcf to 3.908 trillion cubic feet,
easily eclipsing the prior record high of 3.852 tcf hit last
November. 
    (Storage graphic: link.reuters.com/mup44s)
    Current estimates by some traders and analysts show stocks
peaking at about 3.95 tcf before winter withdrawals begin.
    
    RIG COUNT RISES AGAIN
    The number of rigs drilling for natural gas in the United
States rose by eight last week to 424, after posting a 13-year
low the previous week, data from Baker Hughes showed.
 
    (Graphic: r.reuters.com/dyb62s)
    While the gas rig count has gained only 10 times this year,
four of those increases have occurred in the last seven weeks,
stirring concerns that the uptick in gas prices in the last
month might be encouraging producers to hook up more wells.
    Still, the decline in gas-directed drilling over the last
year - the count is down 55 percent since peaking at 936 in
October 2011 - has also fed expectations that producers might
soon curb record output.
    But production has not shown any significant signs of
slowing, with the associated gas produced from more-profitable
shale oil and shale gas liquids wells keeping dry gas flowing at
or near a record pace.
    

 (Editing from Sofina Mirza-Reid)

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