NEW YORK, Nov 5 (Reuters) – U.S. natural gas futures seesawed on either side of unchanged early on Monday, with most traders expecting more downside amid continuing concerns over record high inventories and near-record production.

In addition, more than 1 million customers in the Northeast remained without power a week after Hurricane Sandy knocked down power lines across the region.

Several nuclear power plants in the storm’s path were shut or slowed due to flood waters, but the plants had returned to service by late last week.

Still, a number of plants remained off line for maintenance or refueling, a factor that has supported gas prices as utilities look to replace lost nuclear generation with gas-fired units.

Nuclear outages totaled about 27,400 megawatts, or 27 percent of U.S. capacity, down from 30,100 MW out on Friday but up from 19,300 MW out a year ago and a five-year outage rate of about 22,200 MW.

As of 9:18 a.m. EDT (1318 GMT), NYMEX front-month December natural gas futureswere at $3.569 per million British thermal units, up 1.5 cents.

The contract rose to $3.82 early last week, the highest level for a front month since early November 2011.

The National Weather Service’s six-to-10-day outlook issued on Sunday called for above-normal temperatures for a little more than the eastern third of the nation, and below-normal readings for a little more than the western half.

 

RECORD INVENTORIES

Data from the U.S. Energy Information Administration last week showed domestic natural gas inventories rose the previous week by 65 billion cubic feet to 3.908 trillion cubic feet, easily eclipsing the prior record high of 3.852 tcf hit last November.

Early injection estimates for this week’s EIA storage report range from 15 bcf to 40 bcf versus a year-ago gain of 48 bcf and a five-year average build of 36 bcf for that week.

Current estimates by some traders and analysts show stocks peaking at about 3.95 tcf before winter withdrawals begin.

RIG COUNT RISES AGAIN

The number of rigs drilling for natural gas in the U.S. rose by eight last week to 424, after posting a 13-year low the previous week, data from Baker Hughes showed on Friday.

While the gas rig count has gained only 10 times this year, four of those gains have occurred in the last seven weeks, stirring concerns that the uptick in gas prices in the last month might be encouraging producers to hook up more wells.

Still, the decline in gas-directed drilling over the last year – the count is down 55 percent since peaking at 936 in October 2011 – has also fed expectations that producers might soon curb record output.

But production has not shown any significant signs of slowing. Gross natural gas production in August in the lower 48 U.S. states slipped from July, but at 72.55 bcf per day, output is not far below the record high of 72.74 bcf per day hit in January, according to EIA data.

The associated gas produced from more-profitable shale oil and shale gas liquids wells has kept dry gas flowing at or near a record pace.

Sourced from Cnbc.com November 5, 2012