Reuters: Global Markets: U.S. natgas futures hit 2012 high ahead of storage data

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U.S. natgas futures hit 2012 high ahead of storage data Sep 27th 2012, 14:12 By Eileen Houlihan NEW YORK | Thu Sep 27, 2012 10:12am EDT NEW YORK (Reuters) - U.S. natural gas futures rose more than 2 percent early on Thursday to their highest level of 2012 ahead of weekly inventory data. Traders said a large number of nuclear power plant outages has helped boost near-term demand, but mild autumn weather across much of the nation could limit more upside. Autumn injections into inventories are also poised to pick up as weather loads fade, with this week's report expected to show the first near-seasonal build in a month and only the second in the last 21 weeks. Most traders and analysts expect weekly data from the U.S. Energy Information Administration to show a build of about 76 billion cubic feet when it is released Thursday at 10:30 a.m. EDT (1430 GMT), a Reuters poll showed. Stocks rose an adjusted 104 bcf for the same week last year, and on average over the past five years have gained 76 bcf that week. Despite recent gains, most traders agree prices will have a hard time remaining well above $3 per million British thermal units, the level at which gas loses market share over coal for power generation. As of 9:58 a.m. EDT (1358 GMT), new front-month November natural gas futures on the New York Mercantile Exchange were at $3.272 per mmBtu, up 5.7 cents, or nearly 2 percent. The contract rose as high as $3.287 in electronic trade, matching its highest mark since last December. In the cash market, gas bound for the NYMEX delivery point Henry Hub in Louisiana was heard early up 9 cents at $3.01 on volume near 827 million cubic feet. Early deals eased to nearly 25 cents under the new front-month contract, from deals done late Wednesday 3 cents under the October contract. Gas on the Transco pipeline at the New York citygate was heard up 3 cents early at $3.10 on volume near 291 mmcf. The National Weather Service's six- to 10-day outlook issued on Wednesday called for normal temperatures for much of the nation, with a wide swath of below-normal readings in the mid-Continent and some above-normal readings in the West. On the nuclear front, outages on Thursday totaled 16,600 megawatts, or 16 percent of U.S. capacity, down slightly from 16,800 MW out on Wednesday, but up from 12,000 MW out a year ago and a five-year outage rate of about 12,900 MW. STOCKS HIGH DESPITE LIGHTER-THAN-NORMAL BUILDS Last week's EIA gas storage report showed total domestic inventories rose the prior week by 67 bcf to 3.496 trillion cubic feet. Most traders viewed the build as neutral, noting it was above Reuters poll estimates for a 64-bcf gain, but below last year's rise of 89 bcf and the five-year average increase for that week of 73 bcf. Storage stands 320 bcf, or 10 percent, above the same week in 2011 and 278 bcf, or 9 percent, above the five-year average. (Storage graphic: link.reuters.com/mup44s) Record heat this summer has kept weekly storage builds below the seasonal norm in 20 of the last 21 weeks and helped trim a huge storage surplus to last year from its late-March peak near 900 bcf. But stocks are still at record highs for this time of year and hovering at a level not normally reached until the second week of October. Concerns remain that the inventory overhang will pressure prices soon if storage caverns fill to near capacity and back more natural gas into an already well-supplied market. RIGS RISE IN LATEST WEEK, PRODUCTION STILL HIGH Drilling for natural gas has been in a nearly steady decline for the last 11 months, but the gas-directed rig count rose last week by six to 454, Baker Hughes data showed. The tally hit a 13-year low the previous week. IDnL1E8KLBJL While pure gas drilling has become largely uneconomical at current prices, gas produced from more-profitable shale oil and shale gas liquids wells has kept output stubbornly high. (Rig graphic: r.reuters.com/dyb62s) (Editing by Sofina Mirza-Reid) Link this Share this Digg this Email Reprints

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