March 7, 2013 / 2:57 PM / 5 years ago

UPDATE 3-US natgas futures end up, front hits 6-wk high on EIA data

* U.S. gas inventory draw beats expectations for third week
    * Mild weekend weather seen, but cold to return
    * Nuclear outages running above normal
    * Coming up: Baker Hughes rig data, CFTC trade data Friday

    By Joe Silha
    NEW YORK, March 7 (Reuters) - U.S. natural gas futures ended
up sharply on Thursday, with the front-month contract posting a
six-week high early in the session after a government report
showed a weekly inventory draw well above market expectations.
    The U.S. Energy Information Administration report showed
total domestic gas inventories fell last week by 146 billion
cubic feet to 2.083 trillion cubic feet. 
    "The market ... had already priced in the fact that the
(EIA) report was going to be bullish versus both last year and
the five-year average. What was not priced in ... was a
larger-than-expected withdrawal," Energy Management Institute's
Dominick Chirichella said in a report.
    Most traders agreed the decline was bullish, noting it was
the third straight week that the draw came in above
expectations. A Reuters poll on Wednesday showed traders and
analysts had forecast a 134 bcf drop. 
    Front-month gas futures on the New York Mercantile
Exchange ended up 11.2 cents, or 3.2 percent, at $3.582 per
million British thermal units, after climbing to a six-week high
of $3.603 right after the EIA report was released.
    Cold late-winter weather has helped push the front contract
up nearly 14 percent in the last three weeks, turning the chart
picture more supportive as it broke some key moving average and
trendline resistance along the way.
    The near contract has gained 3.6 percent so far this week
following a 5 percent rise last week, but many technical traders
still need a front-month close above this year's high of $3.645
to turn bullish.
    Despite a late-week warm-up, traders noted there was still
some chilly weather in the extended forecast.
    The National Weather Service six- to 10-day and eight- to
14-day forecasts on Thursday showed below-normal temperatures
for the eastern half of the nation.
    Prices have also drawn support from more utilities using gas
for power generation this year and from sizeable nuclear plant
outages that have prompted more gas burn. Gas-fired units are
typically used to offset any shut nuclear generation.
    The weekly stock decline came in well above the 92 bcf pull
seen during the same week last year and the five-year average
drop for that week of 107 bcf.    
    The draw sharply widened the deficit relative to last year
by 54 bcf to 361 bcf, or 15 percent below last year's record
highs for that time. It also sliced 39 bcf from the surplus
versus the five-year average, but storage is still relatively
high at 269 bcf, or 15 percent, above that benchmark.
    Early withdrawal estimates for next week's inventory report
range from 88 bcf to 131 bcf. That would be above the 66 bcf
pulled from storage during the same week in 2012 and above the
five-year average decline for that week of 74 bcf.
    A string of strong weekly withdrawals has prompted analysts
to sharply lower estimates for end-winter storage, with some
expecting inventories to drop to as low as 1.8 tcf. A Reuters
poll in mid-January showed most had expected stocks to finish
the heating season at about 2 tcf.
    So far this winter, nearly 500 bcf more gas has been pulled
from storage than last year at this time.
    Baker Hughes will issue its next drilling rig report
on Friday. The company's dry gas rig count has fallen in four of
the last five weeks and is hovering just above the 13-1/2 year
low hit in early November, but production remains high.
    The EIA expects marketed gas production in 2013 to hit a
record high for the third straight year.

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