March 1, 2012 / 7:47 PM / 6 years ago

US spot natgas prices mixed after 4 straight losses

 * Cash prices trade mixed after four straight losses
 * Henry Hub cash differential weakens relative to futures
 * Coming up: Baker Hughes rig data, CFTC trade data Friday
 NEW YORK, March 1 (Reuters) - U.S. spot natural gas
prices traded narrowly mixed Thursday after four straight losing
sessions, as high supplies and mild late-winter weather were
offset by signs the market may be tightening.	
 Gas for Friday delivery at Henry Hub NG-W-HH, a key supply
point in Louisiana, edged up 1 cent to $2.45 per million British
thermal units, but late-morning deals weakened to 13 cents under
NYMEX from a 10-cent discount on Wednesday.	
 The daily Hub average is below the February monthly index of
$2.67 and well below the year-ago price of $3.93 and the $4.83
mean on the same day in 2010. 	
 The Hub mostly traded at a premium to front-month futures in
February, as unexpected nuclear plant outages, a steep decline
in gas drilling and planned production cuts by several key
producers helped tighten the market.	
 Cheap gas prices hovering just above 10-year lows also
likely prompted more industrial use and triggered some
additional utility fuel switching from more expensive coal.	
 But a huge inventory surplus and fairly mild end-winter
forecasts may be pressuring sentiment this month, particularly
with concerns that storage ratchets, or contractual obligations,
may force some to cycle gas out of inventory to meet minimum
turnover requirements before the end of the season on March 31.	
 In major consumer markets, next-day prices for gas on the
Transco pipeline at the New York City gate NG-NYCZ6 rose 2
cents to $2.68 despite the milder Friday outlook. Chicago
NG-CHGC was 1 cent higher at $2.51.	
 AccuWeather.com expects temperatures in the Northeast and
Midwest, key gas-consuming regions, mostly to average above
normal for the next 10 days, with daytime highs at times
climbing to the mid- or high 50s Fahrenheit.	
 	
 STORAGE STILL A BIG PROBLEM FOR BULLS	
 Most traders agreed Thursday's weekly inventory report was
bearish, noting the 82 billion cubic feet withdrawal was below
the Reuters poll estimate of 90 bcf and well below the five-year
average decline for that week of 118 bcf. 	
 The U.S. Energy Information Administration report showed
total domestic inventories of 2.513 trillion cubic feet were 
still at record highs for this time of year, standing at 756
bcf, or 43 percent, above last year and 780 bcf, or 45 percent,
above the five-year average level.	
 (Storage graphic: link.reuters.com/mup44s)	
 While on an absolute basis, the stock draw was seen as
bearish, traders noted recent inventory reports have hinted at a
modest tightening in the supply-demand balance. But the slightly
supportive data so far has failed to stir buying.	
 Late-season nuclear plant outages are still running about
6,600 megawatts above normal for this time of year, which could
add more than 1 billion cubic feet to daily gas demand.	
 And planned output cuts by producers could trim 1 bcf per
day from flowing supply.	
 But the specter of stocks ending winter at an all-time high
above 2.2 tcf was making it difficult to be bullish on prices in
the near term, particularly with winter ending on a mild note
and production running at or near record highs.	
 Early withdrawal estimates for next week's EIA report range
from 66 bcf to 95 bcf versus last year's adjusted drop of 63 bcf
and the five-year average decline for that week of 92 bcf.	
 The inventory overhang 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.	
 Estimates for U.S. working gas storage capacity range from
4.1 tcf to 4.4 tcf, a level that could be tested if storage
builds from April through October match last year's 2.2 tcf.  	
     	
 PRODUCTION STILL HIGH	
 Traders are waiting for the next Baker Hughes drilling rig
report on Friday after last week's data showed the gas count
slid to its lowest since September 2009. It was the seventh
straight weekly decline and stirred more talk that low prices
were finally forcing drillers to slow dry gas operations.	
 EIA data on Wednesday showed that December gross natural gas
production in the lower 48 U.S. states slipped slightly from a
record high in November. It was the first decline in 10 months.	
 But the EIA said the largest decline, seen in Wyoming, was
partly due to a compressor fire. Output in key shale plays such
as Marcellus continued to grow. 	
 (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 pure dry gas output.	
 A Bernstein Research report last week 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.	
 In New York Mercantile Exchange trade, front-month gas 
futures ended down 15.3 cents, or 5.8 percent, at $2.463,
pressured by a bearish weekly inventory report and mostly mild
U.S. weather.
 Average prices at other spot gas market points and previous
day prices follow (US$/mmBtu)  	
                                  03/01/12        02/29/12 	
  Henry Hub                            2.45            2.44 	
  New York city gate                   2.68            2.66 	
  Chicago city gate                    2.51            2.50 	
  Panhandle (Mid-continent)            2.29            2.29 	
  Northern at Demarcation  (Minn.)     2.44            2.43 	
  Southern California Border           2.58            2.60 	
  Katy Hub (East Texas)                2.36            2.37 	
  Waha (West Texas)                    2.34            2.36 	
  Dominion-South (Appalachia region)   2.48            2.47 	
  Columbia TCO (Appalachia region)     2.48            2.47 	
  	
 For more U.S. Spot Natural Gas prices click on <0#NG-US> 	
  	
 RELATED LINKS 	
 - Canadian Spot Natural Gas Prices..............<0#NG-CA> 	
 - U.S. Spot Gas versus Oil Comparisons.......... 	
 - BTU U.S. Spot Natural Gas Prices..............<0#NG-BTU> 	
 - U.S. Nuclear Power Reactor Outage Table ...... 	
 - North American Power Plant Outage Table ..... 	
 - North American Power Transmission Table ..... 	
 - U.S. EEI Electricity Output Report ........... 	
 - U.S. EEI Electricity Output Table ............ EEI- 	
 - NYMEX Natural Gas Futures .................... <0#NG:> 	
 - NYMEX Crude Oil Futures .......................<0#CL:>	
	
 (Reporting By Joe Silha)	
 

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