By Joe Silha

NEW YORK, Feb 14 (Reuters) - U.S. natural gas futures

tumbled sharply on Thursday, with the front-month contract

sinking below technical support after a government report showed

a weekly inventory withdrawal that again fell short of market

expectations.

The U.S. Energy Information Administration report showed

total domestic gas inventories fell last week by 157 billion

cubic feet to 2.527 trillion cubic feet.

Most traders viewed the decline as negative for futures

prices, noting it was the third straight week that it fell short

of market expectations. A Reuters poll on Wednesday showed

traders and analysts had expected a 162-bcf drop.

'The net withdrawal for last week was below the consensus

expectation and bearish for prices, although the draw was still

slightly more than the five-year average for the date,' Citi

Futures energy analyst Tim Evans said in a report.

'Overall, the report suggests a further minor bearish shift

in the background supply/demand balance, with modest bearish

implications for reports to follow,' Evans added.

At 11:35 a.m. EST (1635 GMT), front-month gas futures

on the New York Mercantile Exchange were down 14 cents, or 4.2

percent, at $3.166 per million British thermal units after

sliding to an intraday low of $3.161 after the EIA report.

Just prior to release of the weekly storage data at 10:30

a.m., the front month was trading at around $3.28.

Gas prices this year have mostly been stuck in a trading

range between $3.20 and $3.60, but chart traders noted that

Thursday's selloff drove the front contract below technical

support at the double bottom in the $3.20 area. Most agreed a

close today below that level could drive prices lower.

But some noted that current gas prices were low enough to

prompt more utilities to switch from coal to gas to generate

power, while hefty nuclear plant outages this week of more than

14,000 megawatts could boost gas demand further.

Gas-fired units are typically used to offset any shut

nuclear generation.

After a fairly mild week this week, MDA Weather Services

sees temperatures in the West mostly averaging below normal for

the next two weeks, while the eastern half of the nation will

see mostly seasonal readings during that period.

Despite the colder outlook, many traders remained skeptical

of any upside in prices with winter winding down, inventories

still high and production flowing at or near an all-time peak.

STORAGE DRAW ABOVE LAST YEAR, FIVE-YEAR AVERAGE

While the weekly withdrawal fell short of expectations, some

traders noted it came in well above the 113 bcf decline seen

during the same week last year and slightly above the five-year

average for that week of 154 bcf.

The draw sharply widened the deficit relative to last year

by 44 bcf to 270 bcf, or 10 percent below last year's record

highs for that time. It trimmed 3 bcf from the surplus versus

the five-year average, but still left storage relatively high at

348 bcf, or 16 percent, above that benchmark.

(Storage graphic: http://link.reuters.com/mup44s)

Early withdrawal estimates for next week's inventory report

range from 118 bcf to 154 bcf. That would be below the 155 bcf

pulled from storage during the same week in 2012 and possibly

below the five-year average decline for that week of 140 bcf.

If drawdowns for the rest of winter match the five-year

average pace, inventories will end March at 2.076 tcf, about 20

percent above normal but 16 percent below last year, when stocks

finished a very mild heating season at a record high 2.48 tcf.

DRILLING DECLINES, PRODUCTION FAILS TO SLOW

While the Baker Hughes gas-directed rig count has

fallen in four of the last five weeks and is hovering not far

above a 13-1/2 year low hit three months ago, record production

has shown no significant signs of slowing.

(Rig graphic: http://r.reuters.com/dyb62s )

EIA expects marketed gas production to hit a record high

70.02 bcf per day this year, the third straight annual record.

(Reporting by Joe Silha; Editing by Marguerita Choy)

Keywords: MARKETS NYMEX/NATGAS

(joe.silha@thomsonreuters.com)(+1 646 223 6071)(Reuters Messaging: joe.silha.thomsonreuters.com@reuters.net)

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