NEW YORK: US natural gas futures rose nearly 4 percent on Thursday to a 3-1/2 month spot chart high, extending early gains after government storage data showed a fourth straight larger-than-expected weekly drawdown from inventories.
Cold weather returning to consuming regions of the nation late this week and on tap for next week, continued technical buying and above-average nuclear power plant outages also kept momentum to the upside.
"The heating degree days bonanza is not over. Look at the latest updates and we're seeing cold weather in most of the Lower 48 all the way to the end of March," said macro strategist Richard Hastings at Global Hunter Securities.
"If this is the case, then gas demand will remain robust for at least two more weeks," Hastings added.
Front-month April natural gas futures on the New York Mercantile Exchange rose 13.2 cents, or 3.6 percent, to settle at $3.812 per million British thermal units.
The contract rose as high as $3.824, the highest mark for a spot contract since late November.
Most traders agreed the chart picture remained supportive after the front-month contract broke through several key resistance levels on its 22 percent run up from the five-week low of $3.125 hit in mid-February.
But some cautioned that the impending end of winter could provide resistance to higher prices.
"Strong end-of-season weather factors and high levels of electric power sector demand for gas from idled nuclear plants have combined to push gas prices higher, but the approaching start of spring's slack demand shoulder season should provide growing resistance to rising prices in the coming weeks," said Addison Armstrong, senior director of market research at Tradition Energy.
In the cash market, gas for Friday delivery at the NYMEX benchmark Henry Hub <NG-W-HH> in Louisiana rose 2 cents to a 3-1/2 month high of $3.74.
Late deals firmed to 11 cents over the front month, from deals done late Wednesday at a 5-cent premium.
Gas on the Transco pipeline at the New York citygate <NG-NYCZ6>, however, slid 15 cents to $4 as utilities pulled gas from storage rather than purchase in the spot market.
COLDER WEATHER IN NORTHERN REGIONS
Forecaster MDA Weather Services called for warmth to build in the western United States in its one- to five-day outlook, but colder weather in northern regions, including the Northeast.
The latest National Weather Service six- to 10-day forecast issued on Wednesday called for below-normal temperatures for much of the country, with above-normal readings in the Southeast stretching into Texas.
Nuclear outages totaled about 17,400 megawatts, or 17 percent of US capacity, flat to Wednesday's levels and up from a five-year average outage rate of 16,300 MW but down from 19,600 MW out a year ago.
US Energy Information Administration data on Thursday showed storage fell 145 billion cubic feet last week, above Reuters poll expectations for a 134 bcf draw, the year-ago drop of 66 bcf and the five-year average decline for that week of 74 bcf.
The data showed domestic gas inventories are now at 1.938 trillion cubic feet, nearly 19 percent below last year's record high levels for this time of year, but about 11 percent above the five-year average level.
A string of strong weekly withdrawals has prompted analysts to sharply lower estimates for end-winter storage, with some expecting inventories to drop to as low as 1.8 tcf, or about 4 percent above average.
A Reuters poll in mid-January showed most analysts had expected stocks to finish the heating season at about 2 tcf.
Early withdrawal estimates for next week's EIA storage report range from 48 bcf to 69 bcf, versus a flat year-ago week and a five-year average withdrawal of 26 bcf for that week.
Traders were waiting for the next Baker Hughes gas drilling rig report to be released on Friday. Data last week showed the gas-directed rig count fell 13 to a nearly 14-year low of 407.
It was the fifth drop in six weeks, but production has not slowed much, if at all, from the record high posted last year.
While the EIA on Tuesday lowered its growth forecast for 2013, it still expects marketed gas production to hit a record high for the third straight year.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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