Natural gas futures were slightly higher in early trade Friday, though still hovering above 10-year lows, after some upbeat economic data that could signal a boost in industrial demand.

But most traders said concerns over still-bloated inventories and mild late-winter weather should weigh on prices despite a high number of nuclear power plant outages and planned production cuts due to the depressed prices.

Front-month April natural gas futures on the New York Mercantile Exchange were at $2.30 per million British thermal units in early activity, up 2.8 cents, after sliding Thursday to a contract low of $2.235, just above the January low of $2.231, the lowest price for a front month since March 2002.

In the cash market, however, weekend gas bound for the NYMEX delivery point Henry Hub in Louisiana was heard near $2.22 on active volume of over 1 billion cubic feet, down 2 cents from Thursday's average of $2.24 and at its lowest price since September 2009.

Early Hub cash deals were done at about an 8-cent discount to the front-month contract, little changed from deals done late Thursday at about a 9-cent discount.

Gas on the Transco pipeline at the New York City gate was heard early near $2.31 on volume near 97 mmcf, down 14 cents from Thursday's average of $2.45.

STORAGE A PROBLEM FOR PRICES

Thursday's gas storage report from the U.S. Energy Information Administration showed total domestic inventories fell by 80 billion cubic feet to 2.433 trillion cubic feet, below Reuters poll estimates for an 84 bcf drop and the five-year average draw for that week of 92 bcf.

Stocks remain at record highs for this time of year, standing more than 700 bcf, or 40 percent, above both last year and the five-year average level.

(Storage graphic: link.reuters.com/mup44s)

Early withdrawal estimates for next week's EIA report range from 35 bcf to 72 bcf versus last year's drop of 60 bcf and the five-year average decline of 79 bcf for that week.

With no extreme cold on the horizon, stocks are likely to end winter at an all-time high of 2.2 tcf, well above the previous record of 2.148 tcf set in 1983.

The cushion could also spell trouble for prices late in the summer stock-building season if storage caverns fill to capacity and force more supply into the market.

OUTAGES, CUTS COULD HELP TIGHTEN MARKET

Nuclear plant outages were running at about 17,400 megawatts, or 17 percent, on Friday, up from 14,300 MW out a year ago and a five-year outage rate of about 14,300 MW.

Traders said the outages could add more than 1 bcf to daily gas demand.

And planned output cuts by producers could trim 1 bcf per day or more from flowing supply.

Relatively cheap gas has also drawn more industrial use and prompted additional utility fuel switching away from more expensive coal.

But with production still running at or near all-time highs, few traders expect much upside in prices in the near term.

MORE FUNDAMENTALS

The National Weather Service six to 10-day outlook issued on Thursday again called for above or much-above-normal readings for nearly the entire country.

Baker Hughes drilling data last week showed the gas-directed rig count fell for an eighth straight week to a 31-month low of 691.

The steady drop in gas-directed drilling has stirred talk that low prices might finally slow output.

(Rig graphic: r.reuters.com/dyb62s)

Analysts agree it can take months for a slowdown in drilling to translate into lower production, noting the producer shift in spending to higher-value oil and gas liquids plays still produces plenty of associated gas that partly offsets any reductions in dry gas output.

A recent Bernstein report said the gas-directed rig count would have to drop to about 600 before it would be comfortable forecasting flat to falling production.

Most analysts, noting it will be difficult to balance the gas market without serious production cuts, do not expect any major slowdown in gas output until late this year.