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
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
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
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