By Joe Silha
NEW YORK, Feb 20 (Reuters) - Front U.S. natural gas futures
ended higher for a second straight day on Wednesday, backed by
cold weather forecasts for much of the nation for the next two
weeks that should force more homeowners and businesses to turn
up their heaters.
Traders also noted that gas prices were still low enough to
prompt some utilities to switch from coal to gas to generate
power, while hefty nuclear plant outages this week of more than
15,000 megawatts could boost gas demand further as colder
weather drives up demand.
Gas-fired units are typically used to offset any shut
'Any bit of cold right now will create some buying interest,
and we also may be seeing a little short covering after the
sell-off last week,' said Jonathan Lee at Ecova Inc In
Front-month gas futures on the New York Mercantile
Exchange ended up 0.7 cent at $3.279 per million British thermal
units after trading between $3.257 and $3.313. The nearby
contract has gained 4 percent so far this week after sliding 3.6
percent last week.
Forecaster Commodity Weather Group expects U.S. temperatures
to mostly range from normal to below normal for the next two
weeks, with some significant cold spreading south and east later
in the period.
But despite the fairly cold outlook, many traders remained
skeptical of any upside in prices with winter winding down,
inventories still high and production flowing at or near an
LIGHT STORAGE DRAW EXPECTED
Traders and analysts polled by Reuters expect inventories to
have fallen 122 billion cubic feet last week when the U.S.
Energy Information Administration releases its weekly storage
report on Thursday.
Stocks fell by an adjusted 155 bcf during the same week last
year, while the five-year average draw for that week is 140 bcf.
EIA data last week showed total gas inventories of 2.527
trillion cubic feet were 10 percent below last year's record
highs at that time, but were still relatively high at 348 bcf,
or 16 percent, above the five-year average.
Storage draws have come in below market expectations for
three straight weeks.
(Storage graphic: http://link.reuters.com/mup44s)
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.
GAS DRILLING DECLINES FOR THIRD WEEK
Baker Hughes data last week showed the gas-directed
drilling rig count fell for the fifth time in six weeks,
dropping by four to 421.
But while the gas rig count is hovering not far above the
13-1/2 year low of 413 hit three months ago, production has
shown no significant signs of slowing.
(Rig graphic: http://r.reuters.com/dyb62s)
Producers have curbed dry gas drilling, but the associated
gas produced by more profitable liquids-rich wells has kept gas
flowing at or near a record pace.
EIA expects marketed gas production in 2013 to hit a record
high for the third straight year.
(Additional reporting by Eileen Houlihan; Editing by John
Wallace, Sofina Mirza-Reid and Gabriel Debenedetti)
Keywords: MARKETS NYMEX/NATGAS
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