RTRS: U.S. natgas futures rise early, nuclear outages support
* High nuclear plant outages boost near-term demand
* Strong crude futures, positive economic data also support
* Mild autumn weather should limit more gains
* Coming up: API oil data Tuesday, EIA oil data Wednesday
By Eileen Houlihan
NEW YORK, Sept 25 (Reuters) - U.S. natural gas futures rose
about 1 percent early on Tuesday, lifted by strong nuclear power
plant outages that have boosted near-term demand despite mild
autumn weather across much of the nation.
Stronger crude futures and some positive economic news added
momentum to the upside, traders said.
A private report showed modest improvement in U.S. home
prices in July, a sixth straight month of gains, suggesting a
sector that has worried the Federal Reserve is on the mend.
But despite the gains in futures, most traders agree prices
will have a hard time breaking back above $3 per million British
thermal units, the level at which gas tends to lose market share
over coal for power generation.
As of 9:25 a.m. EDT (1325 GMT), front-month October natural
gas futures on the New York Mercantile Exchange were at
$2.86 per mmBtu, up 2.3 cents, or a little less than 1 percent.
The October contract expires on Wednesday.
The nearby contract peaked at $3.277 in late July, its
highest level since last December.
The National Weather Service's six- to 10-day outlook issued
on Monday called for normal or below-normal temperatures for
about the eastern half of the nation and above-normal readings
in the western half.
On the nuclear front, outages on Tuesday totaled 16,600
megawatts, or 16 percent of U.S. capacity, down slightly from
16,800 MW out on Monday, but up from 10,500 MW out a year ago
and a five-year outage rate of about 12,100 MW.
STOCKS HIGH DESPITE LIGHTER-THAN-NORMAL BUILDS
The U.S. Energy Information Administration last week said
domestic gas inventories rose the prior week by 67 billion cubic
feet to 3.496 trillion cubic feet.
Most traders viewed the build as neutral, noting it was
above Reuters poll estimates for a 64-bcf gain, but below last
year's rise of 89 bcf and the five-year average increase for
that week of 73 bcf.
Storage now stands 320 bcf, or 10 percent, above the same
week in 2011 and 278 bcf, or 9 percent, above the five-year
average.
(Storage graphic: link.reuters.com/mup44s)
Record heat this summer has kept weekly storage builds below
the seasonal norm in 20 of the last 21 weeks and helped trim a
huge storage surplus to last year from its late-March peak near
900 bcf.
But stocks are still at record highs for this time of year
and hovering at a level not normally reached until the second
week of October. The surplus offers a huge cushion that can help
offset any spikes in demand or Gulf Coast supply disruptions
from storms.
Traders said autumn injections are poised to pick up as
weather loads fade, with early injection estimates for this
week's report ranging from 69 bcf to 83 bcf versus a
year-earlier build of 104 bcf and the five-year average increase
for the week of 76 bcf.
Concerns remain that the inventory overhang will pressure
prices this autumn if storage caverns fill to near capacity and
back more natural gas into a well-supplied market.
RIGS RISE IN LATEST WEEK, PRODUCTION STILL HIGH
Drilling for natural gas has been in a nearly steady decline
for the last 11 months, but the gas-directed rig count rose last
week by six to 454, Baker Hughes data showed on Friday. The
tally hit a 13-year low the previous week.
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.
(Rig graphic: r.reuters.com/dyb62s)
