Wires

U.S. natgas futures edge higher ahead of weekly storage data

Share

* Front month just below last week's 2012 high

* Nuclear power plant outages still high

* Mild weather on tap for most of the country

* Coming up: EIA gas, oil data later Thursday

By Eileen Houlihan

NEW YORK, Oct 11 (Reuters) - U.S. natural gas futures edgedhigher early on Thursday as near-term cool weather andcontinuing nuclear power plant outages kept demand strong aheadof a weekly inventory report.

Most traders and analysts expect data from the U.S. EnergyInformation Administration to show an inventory build of about80 billion cubic feet when the figures are released Thursday at10:30 a.m. EDT (1430 GMT), a Reuters poll showed.

Stocks rose an adjusted 108 bcf in the same week last yearand have gained, on average, 84 bcf in that week over the pastfive years

But milder weather on tap for later in the month and for atleast the start of winter was expected to limit further gains.

In addition, many traders remain concerned that gas pricedwell above $3 per million British thermal units will continue tolose market share to coal for power generation.

As of 9:22 a.m. (1322 GMT), front-month November natural gasfutures on the New York Mercantile Exchange

were at$3.519 per mmBtu, up 4.4 cents, or about 1 percent. The contractrose as high as $3.546 just over a week ago, its highest levelsince December.

The National Weather Service six- to 10-day outlook issuedon Wednesday called for above-normal temperatures for nearly theentire nation, with normal or below-normal readings only in theNorthwest.

On the nuclear front, outages totaled about 19,200megawatts, or 19 percent of U.S. capacity, down slightly from20,000 MW on Wednesday, 22,700 MW a year ago and the five-yearaverage outage rate of 19,700 MW.

STORAGE BUILDS GROW

Last week's EIA gas storage report showed domestic gasinventories rose the previous week by 77 bcf to 3.653 trillioncubic feet.

Storage stands 8 percent above the same week in 2011 and 8percent above the five-year average level.

(Storage graphic:)

Inventories are still at record highs for this time of yearand are likely to end the stock-building season above lastyear's all-time high of 3.852 tcf.

At 86 percent full, storage is hovering at a level notnormally reached until the last week of October, offering a hugecushion that can help offset any weather-related spikes indemand or supply disruptions from storms.

HIGH PRODUCTION

Baker Hughes data last week showed the gas-directed rigcount rose by two to 437 after sliding to another 13-year lowthe prior week.

It was the second gain in three weeks, but only the eighthtime this year that the gas rig count has risen. The count isstill down 53 percent since peaking at 936 last October.

Drilling for natural gas has been in a near-steady declinefor the last year, but so far production has shown nosignificant sign of slowing.

(Rig graphic:)

While dry gas drilling has become largely uneconomical atcurrent prices, gas produced from more profitable shale oil andshale gas liquids wells has kept output near record highs.

(Editing by John Wallace)

((eileen.houlihan@thomsonreuters.com, Twitter@eileenreuters)(+1 646 223-6074)(Reuters Messaging:eileen.houlihan.reuters.com@reuters.net))

Keywords: MARKETS NYMEX/NATGAS