U.S. natgas futures edge down from 2012 high ahead of weekend


* Front month slips from overnight 2012 high

* Nuclear power plant outages still strong

* Mostly milder weather on tap for the nation

* Coming up: Baker Hughes gas drilling rig data Friday

By Eileen Houlihan

NEW YORK, Oct 12 (Reuters) - U.S. natural gas futures edgedlower early on Friday, which traders blamed on some profittaking after the front month rose to a fresh 2012 high inelectronic trade.

A smaller-than-expected weekly inventory build and somenear-term cool weather in consuming regions boosted the contracton Thursday. The front month had gained 6 percent so far thisweek before Friday's dip.

But milder weather on tap for later in the month and for atleast the start of winter was seen limiting 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$3.577 per mmBtu, down 2.7 cents, or about 1 percent. Thecontract rose as high as $3.638 in electronic trade, its highestsince early December.

The National Weather Service six- to 10-day outlook issuedon Thursday called for above-normal temperatures in theNortheast and Southwest and mostly normal readings elsewhereacross the nation.

On the nuclear front, outages totaled about 20,100megawatts, or 20 percent of U.S. capacity, up from 19,200 MW onThursday and a five-year outage rate of about 20,000 MW, butjust under last year's 20,200 MW out on the same day.


Thursday's gas storage report from the U.S. EnergyInformation Administration showed domestic gas inventories roselast week by 72 billion cubic feet to 3.725 trillion.

Traders viewed the build as bullish, noting it was belowReuters poll estimates for an 80 bcf gain, the year-agoinjection of 108 bcf and the five-year average increase for thatweek of 84 bcf.

But storage still stands nearly 7 percent above last year'slevels and nearly 8 percent 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.

Storage, now at 88 percent full, is at a level that exceedsthe average peak for the year of about 3.7 tcf typically hit inearly November. Without some unseasonably cold weather thismonth, stocks are likely to grow for four or five more weeks.

Early injection estimates for next week's EIA report rangefrom 30 bcf to 60 bcf versus a year-earlier build of 106 bcf andthe five-year average increase for the week of 71 bcf.


Traders awaited the next Baker Hughes gas drilling reportexpected later Friday. Data last week showed the gas-directedrig count rose by two to 437 after sliding to another 13-yearlow the 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 Bob Burgdorfer)

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