January 10, 2013 / 3:07 PM / 5 years ago

UPDATE 3-US natgas futures end up on EIA data,1st gain in 4 days

* Big inventory draw easily beats last winter's peak decline
    * High storage, production limit upside in prices
    * Coming up: Baker Hughes rig data, CFTC trade data Friday

 (Recasts, adds analyst quote, updates with closing prices)
    By Joe Silha
    NEW YORK, Jan 10 (Reuters) - Front-month U.S. natural gas
futures ended higher on Thursday for the first time in four
sessions, underpinned by a government report showing a weekly
inventory withdrawal well above market expectations.
    The U.S. Energy Information Administration report showed
domestic gas inventories fell last week by 201 billion cubic
feet to 3.316 trillion cubic feet. 
    Traders viewed the draw as bullish, noting it was well above
the Reuters poll estimate of 186 bcf, the year-ago decline of 90
bcf, and the five-year average drop for the week of 132 bcf.
    The triple-digit decline came in above the highest estimate
in the Reuters poll, 195 bcf, and easily beat last heating
season's peak draw of 192 bcf, posted in late January 2012.
    Traders said it may reflect some permanent underlying growth
in demand this year as utilities switched from coal to cheaper
gas for power generation.
    "It was an impressive EIA number. We finally got some cold,
and it looks like some of the load lost by coal in the power
generation sector pumped up usage," said Tom Saal, senior vice
president at INTL FCStone in Miami.
    Front-month gas futures on the New York Mercantile
Exchange ended up 8 cents, or 2.6 percent, at $3.193 per million
British thermal units after climbing to an intraday high of
$3.211 after the EIA report.
    Just prior to release of the weekly storage data at 10:30 
a.m., the front month was trading at around $3.16.     
    The front contract, which lost 5.2 percent last week,
dropped 5.3 percent in the previous three sessions as mild
weather blanketed much of the country and slowed heating needs. 
    With no extreme cold on the horizon, most traders expect
further upside in prices to be difficult, noting inventories
remain well above average for this time of year and production
is still flowing at or near an all-time peak.
    AccuWeather.com expects temperatures in the Northeast and
Midwest, key gas-consuming regions, to average above normal for
the next few days, then cool to below normal next week as
daytime highs drop into the 20s and 30s degrees Fahrenheit.    
            
    BIG INVENTORY DRAW
    The weekly storage draw drove inventories to 88 bcf, or
nearly 3 percent, below last year's record highs for this time
of year. While it also trimmed 69 bcf from the surplus relative
to the five-year average, stocks are still high at 320 bcf, or
about 11 percent above average.
    (Storage graphic: link.reuters.com/mup44s )          
    
    Early withdrawal estimates for next week's storage report
range from 100 bcf to 143 bcf. That would be well above the 89
bcf pulled from inventory during the same week last year, but
below the five-year average decline for that week of 144 bcf.
    
    GAS DRILLING GAINS, PRODUCTION STILL NEAR RECORD
    Traders were waiting for the next drilling rig report from
Baker Hughes on Friday.
    (Rig graphic: r.reuters.com/dyb62s)
    Drilling for natural gas has mostly been in decline for more
than a year, with gas rigs down some 53 percent since peaking in
2011 at 936 in October.
    But so far production has not shown any signs of slowing.
    EIA data on Monday showed gross U.S. gas production in
October climbed to 73.54 bcf per day, the second straight
monthly record.
    On Tuesday, the agency said it expected marketed natural gas
production in 2013 to rise nearly 1 percent to an average of
69.84 bcf daily, which would be the third straight year of
record output.    

 (Additional reporting by Eileen Houlihan; editing by Jim
Marshall and John Wallace)

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