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U.S. natgas futures edge off five-week high pre-EIA
September 13, 2012 / 1:40 PM / 5 years ago

U.S. natgas futures edge off five-week high pre-EIA

* Traders expect light weekly inventory build
    * Nuclear power plant outages remain strong
    * Mostly mild weather on tap for consuming regions
    * Coming up: EIA natgas storage data Thursday

    By Eileen Houlihan
    NEW YORK, Sept 13 (Reuters) - U.S. natural gas futures edged
lower early on Thursday, after climbing in electronic trade to a
five-week high amid expectations for a small weekly inventory
build and a large number of nuclear power plant outages.
    Traders said milder autumn weather on tap for much of the
country should curb demand, while shut-in offshore Gulf of
Mexico gas production from Hurricane Isaac had nearly returned
to normal.
    The shut-in production curbed last week's inventory
injection and is expected to do the same in this week's report.
    Most traders and analysts expect data from the U.S. Energy
Information Administration to show a build of about 28 billion
cubic feet when it is released at about 10:30 a.m. EDT (1430
GMT), a Reuters poll showed. 
    Stocks rose an adjusted 80 bcf in the same week last year,
and on average over the past five years have gained about 72 bcf
for that week.
    While prices are hovering above $3 per million British
thermal units, most expect no sustained rally at this level. Gas
tends to lose much of its appeal over coal for power generation
above $3.
    As of 9:29 a.m. EDT (1329 GMT), front-month October natural
gas futures on the New York Mercantile Exchange were at
$3.028 per mmBtu, down 3.5 cents, or about 1 percent. The front
month rose to a five-week high of $3.07 in electronic trade. 
    The nearby contract peaked at $3.277 in late July, its
highest since December.
    The National Weather Service's six- to 10-day outlook issued
on Wednesday again called for below-normal temperatures for most
of the mid-Continent and above-normal readings along the West
Coast and in parts of New England.
    On the nuclear front, outages totaled 9,100 megawatts, or 9
percent of U.S. capacity, on Thursday, flat with Wednesday's
outages, but up from 8,500 MW a year ago and a five-year outage
rate of about 7,200 MW. 
    
    STORAGE STILL BLOATED
    Last week's EIA storage report showed domestic gas
inventories rose the previous week by 28 bcf to 3.402 tcf.
    (Storage graphic: link.reuters.com/mup44s) 
    While a huge inventory surplus from the start of the
injection season has been sliced by more than half, storage is
395 bcf, or 13 percent, above last year's levels and 329 bcf, or
nearly 11 percent, above the five-year average.
    Stocks are at levels that still offer a huge cushion that
can help offset any weather-related spikes in demand or further
supply disruptions from storms.
    The EIA on Wednesday revised upward peak U.S. working
natural gas storage capacity by about 3.3 percent from last
year's estimate. 
    The EIA said demonstrated peak capacity - the sum of the
highest working gas inventory level observed in each reporting
facility over the last five years - climbed 136 billion cubic
feet to 4.239 trillion cubic feet.
    
    DRILLING RIGS SINK TO 13-YEAR LOW
    Baker Hughes data last week showed the number of rigs
drilling for natural gas in the United States slid by 21 to a
13-year low of 452. 
    (Graphic: r.reuters.com/dyb62s)
    The count was down for the 14th time in 16 weeks. The nearly
steady decline in gas-directed drilling over the last 10 months
has fed expectations that producers were getting serious about
stemming the flood of record supplies. So far, however, there is
little evidence that gas output is slowing.

 (Editing by Dale Hudson)
 (eileen.houlihan@thomsonreuters.com, Twitter @eileenreuters; +1
646 223-6074; Reuters Messaging:
eileen.houlihan.reuters.com@reuters.net)

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