UPDATE 2-US gas futures extend gains after big EIA storage draw
* Front month remains above Wednesday's 3-month spot low * Long-term outlooks call for mostly mild weather * Coming up: Baker Hughes gas drilling rig data Friday By Eileen Houlihan NEW YORK, Jan 4 (Reuters) - U.S. natural gas futuresextended gains on Friday, their first in four sessions, aftergovernment storage data showed a larger-than-expected drawdownfrom winter inventories. As of 10:55 a.m. EST (1555 GMT), front-month Februarynatural gas futures on the New York Mercantile Exchange were at $3.267 per million British thermal units, up 6.9 cents,or just over 2 percent. The contract rose as high as $3.294, up about 3 percent,immediately following the release of data from the U.S. EnergyInformation Administration at 10:30 a.m. that showed gasinventories fell last week by 135 billion cubic feet, aboveindustry expectations for a 127 bcf draw. Despite the big draw, traders noted storage still remains at3.517 trillion cubic feet, nearly 1 percent above year-agolevels and more than 12 percent above the five-year averagelevel. With fairly mild weather on tap for the next few weeks,traders expect the upside to be limited unless some sustainedcold arrives to boost heating loads and further draw downstorage. The latest National Weather Service six-to-10-day forecastissued on Thursday again called for above-normal temperaturesfor the eastern half of the U.S., with below-normal readings formost of the western half. In the cash market, weekend gas for delivery at the NYMEXbenchmark Henry Hub in Louisiana was heard early down2 cents at $3.17. Early deals eased to 7 cents under the front-month contract,from deals done late Thursday at a 3-cent discount. Gas on the Transco pipeline at the New York citygate was heard early down more than $1 at $4.81. Nuclear outages totaled just 7,500 megawatts, or 7 percent,of U.S. capacity, even with outages on Thursday, but up from4,300 MW out a year ago and a five-year average outage rate ofabout 5,000 MW. WINTER STORAGE STILL BLOATED Inventories started the heating season in early November ata record high 3.929 tcf, the fourth straight year thatinventories have headed into the heating season at an all-timepeak. Early withdrawal estimates for next week's EIA storagereport range from 155 bcf to 176 bcf versus a 137-bcf declineduring the same year-ago week and a five-year average draw forthat week of about 165 bcf. RIGS GAIN, OUTPUT STILL NEAR RECORD Traders were awaiting the next Baker Hughes gas drillingreport due out later Friday. Data last week showed thegas-directed rig count rose by two to 431, its second straightweekly gain. But drilling for natural gas has mostly declined for morethan a year, with gas rigs down 54 percent since peaking at 936in October 2011. The gas rig count is hovering just above a 13-1/2-year lowof 413 hit seven weeks ago, but so far production has not shownany significant sign of slowing. The EIA expects gas output in 2013 to rise to a record highof 69.59 bcf per day, the third straight annual record.