Mon Oct 15, 2012 9:28am EDT * Front month remains below last week's 2012 high * Milder weather on tap for much of the nation * Nuclear power plant outages remain strong * Coming up: API oil data Tuesday, EIA oil data Wednesday
By Eileen Houlihan NEW YORK, Oct 15 (Reuters) - U.S. natural gas futures slid more than 3 percent early on Monday, pressured by milder weather forecasts and some profit-taking after the front month rose to a 2012 high last week. The front month contract rose more than 6 percent last week, topping out on Friday at its highest level this year amid some cool weather in consuming regions and strong nuclear power plant outages. Continued nuclear outages should help limit the downside, but many traders remain concerned that gas priced well above $3 per million British thermal units will continue to lose market share to coal for power generation. As of 9:18 a.m. (1318 GMT), front-month November natural gas futures on the New York Mercantile Exchange were at $3.498 per mmBtu, down 11.3 cents, or just over 3 percent. The contract rose as high as $3.638 on Friday, its highest mark since early December. The National Weather Service six- to 10-day outlook issued on Sunday called for above-normal temperatures in the Northeast and across most of the South and West and some below-normal readings only in the Southeast and a small area in the Northwest. On the nuclear front, outages totaled about 24,500 megawatts, or 24 percent of U.S. capacity, up from 20,100 MW out on Friday, 22,400 MW out a year ago and a five-year outage rate of about 21,600 MW. INVENTORIES STILL HIGH Last week's gas storage report from the U.S. Energy Information Administration showed that domestic gas inventories rose the prior week by 72 billion cubic feet to 3.725 trillion. Storage still stands nearly 7 percent above last year's levels and nearly 8 percent above the five-year average. (Storage graphic: link.reuters.com/mup44s) Inventories are at record highs for this time of year and are likely to end the stock-building season above last year's all-time high of 3.852 tcf. Storage, now at 88 percent full, is at a level that exceeds the average peak for the year of about 3.7 tcf typically hit in early November. Without some unseasonably cold weather this month, stocks are likely to grow for four or five more weeks. Early injection estimates for this week's EIA report range from 30 bcf to 58 bcf versus a year-earlier build of 106 bcf and the five-year average increase for the week of 71 bcf. HIGH PRODUCTION ALSO Data from Baker Hughes on Friday showed the gas-directed rig count slid by 15 last week to a 13-year low of 422. The count is down 55 percent since peaking at 936 last October. Drilling for natural gas has been in a near-steady decline for the last year, but so far production has shown no significant sign of slowing. (Rig graphic: r.reuters.com/dyb62s) 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.