US gas futures little changed ahead of storage data
* New front-month under Wednesday's 5-1/2 month high
* Hot weather still on tap in six to 10-day outlooks
* Recent storage data, drilling rig data supportive
* Coming Up: EIA natgas storage data Thursday
By Eileen Houlihan
NEW YORK, June 28 (Reuters) - U.S. natural gas futures were little changed in early trade Thursday, with traders awaiting more direction from weekly inventory data due out later this morning.
On Wednesday nearby futures rose to a 5-1/2 month spot chart high amid forecasts for more hot weather in what has become a scorching start to summer.
Continued widespread heat is expected over most of the nation for at least the next two weeks.
In addition, Tropical Storm Debby knocked out about 5 billion cubic feet of offshore Gulf of Mexico production over the weekend, but no serious damage to facilities was reported.
Most traders and analysts expect this week's storage report from the U.S. Energy Information Administration to show a build of about 52 bcf when it is released today at about 10:30 a.m. EDT (1430 GMT), a Reuters poll showed.
Last year stocks rose an adjusted 84 bcf for that week and on average for the past five years have gained 85 bcf that week.
If the build comes in near the Reuters poll number, it will be below average for a ninth straight week, a factor that has helped raised expectations that record-high inventories will be trimmed to manageable levels in the 21 weeks before winter withdrawals begin.
As of 9:28 a.m. EDT (1328 GMT), new front-month August natural gas futures on the New York Mercantile Exchange were at $2.80 per million British thermal units, up 0.2 cent. The July contract traded as high as $2.946, its highest mark since early January, before expiring less than 1 cent higher for the day.
Some traders remained concerned that a move close to $3 would again reduce the appeal of gas over coal for power generation.
Since posting a 10-year low of $1.902 twice in late April, nearby futures are up about 47 percent on signs that record production was finally slowing and demand picking up as more electric utilities switched from coal to gas.
ANOTHER LIGHT BUILD BUT STORAGE STILL AT RECORD
Last week's EIA storage report showed total domestic gas inventories rose by 62 bcf to 3.006 trillion cubic feet.
The build trimmed the surplus to last year to 680 bcf, or 29 percent, and sliced the excess versus the five-year average to 641 bcf, or 27 percent.
(Storage graphic: link.reuters.com/mup44s)
But inventories remained at record highs for this time of year, topping the 3 tcf mark at the earliest on record, according to weekly and monthly EIA data going back more than 35 years.
Total storage is already 73 percent full and hovering at a level not normally reached until late August. Producing-region stocks are at 83 percent of capacity.
Concerns remained that the storage overhang could still drive prices to new lows this summer as storage caverns fill.
The storage surplus to last year will have to be cut by at least another 435 bcf to avoid breaching the government's 4.1-tcf estimate of total capacity.
Stocks peaked last year in November at a record 3.852 tcf. The EIA expects gas storage to climb to a record 4.015 tcf by the end of October.
DEMAND UP, PRODUCTION GROWTH SLOWS
Gas demand picked up sharply this year as spring prices hit 10-year lows, prompting many utilities to use more gas-fired generators to produce power.
Baker Hughes data last week showed the gas-directed rig count fell by 21 to a 13-year low of 541, its eighth drop in nine weeks.
(Rig graphic: r.reuters.com/dyb62s)
A 42 percent drop in dry gas drilling in the last eight months has raised expectations that producers are finally getting serious about curbing record supplies.
But the producer shift in focus away from dry gas to higher-value shale oil and shale gas liquid plays still produces plenty of associated gas that ends up in the market after processing. That has slowed the overall drop in dry gas output.
While EIA expects 2012 marketed gas production to average a record high 68.47 bcf per day, up 3.4 percent from last year, it sees demand, driven by strong gains in the electric power sector, rising 4.1 percent.
The National Weather Service's 6- to 10-day outlook issued on Wednesday again called for above-normal readings for most of the nation, with normal or below-normal readings only in the West and Florida.
Nuclear power plant outages were running at about 9,000 megawatts, or 9 percent, on Thursday, up from 8,400 MW a year ago and a five-year outage rate of just 5,900 MW.
The U.S. National Hurricane Center was monitoring the remnants of Tropical Storm Debby, west-northwest of Bermuda, and a tropical wave well east of the Windward Islands. No other storm formation was expected over the next 48 hours. The Atlantic hurricane season runs from June 1 through Nov. 30.
The latest government statistics show the Gulf of Mexico accounts for 6 percent of U.S. gas production and just over 20 percent of U.S. oil production. (Reporting by Eileen Houlihan; editing by John Wallace)
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