March 14, 2012 / 1:17 PM / 5 years ago

US natgas hovers near 10-year low, mild weather weighs

* Front month just above Tuesday's 10-year low
    * Mild weather on tap for most of nation
    * US crude futures edge lower early
    * Coming Up: EIA oil data Wednesday, EIA gas data Thursday

    NEW YORK, March 14 (Reuters) - U.S. natural gas
futures were about 3 cents, or more than 1 percent, lower early
Wednesday, hovering just above Tuesday's 10-year spot chart low.	
    Traders said continued mild late-winter weather has curbed
any heating demand and left inventories swelled ahead of the
spring injection season.	
    Front-month April natural gas futures on the New York
Mercantile Exchange were at $2.267 per million British
thermal units in early activity, down 3.2 cents, or a little
over 1 percent.	
    On Tuesday the contract slid early to $2.204, the lowest
price for a front month since February 2002, before ending the
day up about 1 percent.	
                     	
    STORAGE OVERHANG A PROBLEM FOR PRICES	
    Last week's gas storage report from the U.S. Energy
Information Administration showed total domestic inventories
fell by 80 billion cubic feet to 2.433 trillion cubic feet,
still at record highs for this time of year, and more than 700
bcf, or 40 percent, above both last year and the five-year
average level. 	
    (Storage graphic: link.reuters.com/mup44s)	
    Withdrawal estimates for this week's EIA report range from
47 bcf to 66 bcf versus last year's drop of 60 bcf and the
five-year average decline of 79 bcf for that week.	
    With no extreme cold on the horizon, stocks are likely to
end winter at an all-time high of 2.2 tcf, well above the
previous record of 2.148 tcf set in 1983.	
    The cushion could also spell trouble for prices late in the
summer stock-building season if storage caverns fill to capacity
and force more supply into the market.	
    	
    OUTAGES, CUTS COULD HELP TIGHTEN MARKET	
    Nuclear plant outages were running at about 19,600
megawatts, or 20 percent, on Wednesday, up from 15,800 MW out a
year ago and a five-year outage rate of about 15,200 MW.
 	
    Traders said the outages could add more than 1 bcf to daily
gas demand.	
    And planned output cuts by producers could trim 1 bcf per
day or more from flowing supply.	
    Relatively cheap gas has also drawn more industrial use and
prompted additional utility fuel switching away from more
expensive coal.	
    But with production still running at or near all-time highs,
 few traders expect much upside in prices in the near term.	
     	
    MORE FUNDAMENTALS	
    The National Weather Service six to 10-day outlook issued on
Tuesday again called for above or much-above-normal readings for
about the eastern two-thirds of the nation and below-normal
readings only in the West.	
    Baker Hughes drilling data last week showed the gas-directed
rig count fell for a ninth straight week to a 32-month low of
670. 	
    The steady drop in gas-directed drilling has stirred talk
that low prices might finally slow output.	
    (Rig graphic: r.reuters.com/dyb62s)    	
    Analysts agree it can take months for a slowdown in drilling
to translate into lower production, noting the producer shift in
spending to higher-value oil and gas liquids plays still
produces plenty of associated gas that partly offsets any
reductions in dry gas output.	
    A recent Bernstein report said the gas-directed rig count
would have to drop to about 600 before it would be comfortable
forecasting flat to falling production.	
    Most analysts, noting it will be difficult to balance the
gas market without serious production cuts, do not expect any
major slowdown in gas output until late this year.	
    	
	
 (Reporting by Eileen Houlihan)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below