* Front month well below Monday’s 2012 peak
* Nuclear power plant outages very strong
* Cool weather in near term, milder long-term
* Coming up: EIA natgas storage data Thursday
(Adds cash prices, updates futures prices)
By Eileen Houlihan
NEW YORK, Oct 25 (Reuters) – U.S. natural gas futures edged
lower early on Thursday, extending the previous day’s losses, as
forecasts for milder weather in long-term outlooks and
expectations for a sizeable build to already record-high
inventories weighed on sentiment.
Despite some cool weather on tap for next week in consuming
regions, forecasts for November are pointing to milder weather,
traders said, curbing early winter heating demand.
In addition, traders and analysts expect weekly data from
the U.S. Energy Information Administration to show a build of
about 67 billion cubic feet when it is released at 10:30 a.m.
EDT (1430 GMT), a Reuters poll showed.
Stocks gained an adjusted 95 bcf in the same week last year,
and have risen about 65 bcf on average that week over the past
five years.
Despite strong technical gains this month, many traders
remain concerned that gas priced at well above $3 per million
British thermal units will continue to lose market share to coal
for power generation.
But most traders said large outages at nuclear power plants
could help limit the downside.
As of 9:45 a.m. EDT (1345 GMT), front-month November natural
gas futures on the New York Mercantile Exchange were at
$3.432 per mmBtu, down 1.8 cents. Futures rose on Monday to
$3.648, the highest price for a spot contract since early
December, according to Reuters data.
In the cash market, gas bound for the NYMEX delivery point
Henry Hub in Louisiana was heard early down 4 cents at
$3.39 on volume near 639 million cubic feet.
Early deals were done at 4 cents under the front-month
contract, little changed from deals done late Wednesday at a
1-cent discount.
Gas on the Transco pipeline at the New York citygate
was also heard down 4 cents at $3.56 on volume near
191 mmcf.
The National Weather Service’s six- to 10-day outlook issued
on Wednesday called for below-normal temperatures for about the
eastern half of the country and above-normal readings for most
of the western half.
On the nuclear front, outages totaled about 27,600
megawatts, or 27 percent of U.S. capacity, up from 26,500 MW out
on Wednesday, 21,200 MW out a year ago and a five-year outage
rate of about 23,200 MW.
RECORD INVENTORIES
Last week’s EIA gas storage report showed domestic
inventories rose the prior week by 51 bcf to 3.776 trillion
cubic feet.
Stocks remain 5 percent above year-ago levels and more than
7 percent above the five-year average.
(Storage graphic: http://link.reuters.com/mup44s)
While a huge inventory surplus, which peaked in late March
at nearly 900 bcf, has been cut by 80 percent, inventories are
still at record highs for this time of year.
At 89 percent full, stocks are above the average peak for
the year of 3.7 tcf, usually hit in early November.
Without some unseasonably cold weather soon, stocks are
likely to grow for three or four more weeks and easily end the
injection season above last year’s all-time high of 3.852 tcf.
RIG COUNT EDGES HIGHER
Data from Baker Hughes last week showed the gas-drilling rig
count had risen by five to 427, from a 13-year low the prior
week.
(Rig graphic: http://r.reuters.com/dyb62s)
The count is down 54 percent since peaking at 936 last
October, with the decline feeding expectations that producers
were getting serious about stemming record supplies.
But so far, there is little evidence that gas output is
slowing.
While dry gas drilling has become largely uneconomical at
current prices, gas produced from more-profitable shale oil and
shale gas liquids wells has kept output near record highs.
(Editing by Bernadette Baum and Dale Hudson)
