U.S. natgas futures slip 3 pct on milder weather outlook
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 slidmore than 3 percent early on Monday, pressured by milder weatherforecasts and some profit-taking after the front month rose to a2012 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 somecool weather in consuming regions and strong nuclear power plantoutages. Continued nuclear outages should help limit the downside,but many traders remain concerned that gas priced well above $3per million British thermal units will continue to lose marketshare to coal for power generation. As of 9:18 a.m. (1318 GMT), front-month November natural gasfutures on the New York Mercantile Exchange were at$3.498 per mmBtu, down 11.3 cents, or just over 3 percent. Thecontract rose as high as $3.638 on Friday, its highest marksince early December. The National Weather Service six- to 10-day outlook issuedon Sunday called for above-normal temperatures in the Northeastand across most of the South and West and some below-normalreadings only in the Southeast and a small area in theNorthwest. On the nuclear front, outages totaled about 24,500megawatts, or 24 percent of U.S. capacity, up from 20,100 MW outon Friday, 22,400 MW out a year ago and a five-year outage rateof about 21,600 MW. INVENTORIES STILL HIGH Last week's gas storage report from the U.S. EnergyInformation Administration showed that domestic gas inventoriesrose the prior week by 72 billion cubic feet to 3.725 trillion. Storage still stands nearly 7 percent above last year'slevels 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 andare likely to end the stock-building season above last year'sall-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 this week's EIA report rangefrom 30 bcf to 58 bcf versus a year-earlier build of 106 bcf andthe five-year average increase for the week of 71 bcf. HIGH PRODUCTION ALSO Data from Baker Hughes on Friday showed the gas-directed rigcount slid by 15 last week to a 13-year low of 422. The count is down 55 percent since peaking at 936 lastOctober. 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: r.reuters.com/dyb62s) 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.