US natgas futures resume trek higher ahead of storage data

* Front month below Tuesday's 2012 high

* Nuclear power plant outages still strong

* Cooler weather on tap for much of the country

* Coming up: EIA natgas storage data Thursday

By Eileen Houlihan

NEW YORK, Oct 4 (Reuters) - U.S. natural gas futures edged higher early on Thursday, resuming a recent run up that brought the nearby contract to its highest mark this year.

On Wednesday gas futures closed lower for the first time in seven sessions, after the prior six session, 24-percent gain pushed the November contract to its loftiest price since last December.

Cooler weather on tap for much of the nation in the coming days and strong nuclear power plant outages supported the rise, but 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.

Traders and analysts also expect another healthy build to already record high inventories when weekly data is released on Thursday.

As of 9:26 a.m. EDT (1326 GMT), front-month November natural gas futures on the New York Mercantile Exchange

were at $3.426 per mmBtu, up 3.1 cents, or about 1 percent. The contract rose as high as $3.546 on Tuesday, its best mark since December.

The National Weather Service's six- to 10-day outlook issued on Wednesday again called for below or much-below-normal temperatures for nearly the entire nation, with normal or above-normal readings only in the Northwest and parts of the South.

On the nuclear front, outages on Thursday totaled 15,900 megawatts, or 16 percent of U.S. capacity, flat with Wednesday's outages, but up from 14,500 MW out a year ago and a five-year outage rate of about 15,800 MW.


Most traders and analysts expect weekly gas storage data from the U.S. Energy Information Administration to show a build of about 71 billion cubic feet when it is released on Thursday at about 10:30 a.m. EDT (1430 GMT), a Reuters poll showed.

Stocks rose an adjusted 101 bcf in the same week last year and on average the past five years have gained 78 bcf that week.

Last week's EIA gas storage report showed domestic gas inventories rose in the previous week by 80 bcf to 3.576 trillion cubic feet. It was the biggest weekly injection so far this year.

Record heat this summer helped trim a huge storage surplus relative to last year from its late-March high near 900 bcf, but traders expected builds to continue to pick up as weather loads fade.

Domestic gas inventories are still at record peaks for this time of year and likely to end the stock-building season above last year's all-time high of 3.852 trillion cubic feet.

(Storage graphic: )

At 82 percent full, stocks hovered at levels not normally reached until the second week of October and still offered a huge cushion that can help offset any weather-related spikes in demand or supply disruptions from storms.


Drilling for natural gas has been in a nearly steady decline for the last 11 months, sliding by 19 rigs last week to a 13-year low of 435, Baker Hughes data showed.

(Rig graphic: )

But while pure gas drilling has become largely uneconomical at current prices, gas produced from more-profitable shale oil and shale gas liquids wells has kept output stubbornly high.

EIA gross natural gas production data on Friday showed July output climbed 0.4 percent from June to 72.58 bcf per day, not far below January's record high of 72.74 bcfd.

(Editing by Sofina Mirza-Reid)

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