Natural gas futures were down about 2 cents, or 1 percent, early Wednesday, hovering just above Tuesday's 10-year spot chart low.

Traders said continued mild late-winter weather has curbed any heating demand and left inventories swelled ahead of the spring injection season.

Front-month April natural gas futures on the New York Mercantile Exchange were at $2.276 per million British thermal units in early activity, down 2.3 cents, or 1 percent.

On Tuesday the contract slid early to $2.204, the lowest price for a front month since February 2002, before ending the day up about 1 percent.

In the cash market, gas bound for the NYMEX delivery point Henry Hub in Louisiana was heard early near $2.13 on volume near 799 million cubic feet, down 2 cents from Tuesday's average of $2.15 and at its lowest mark since September 2009.

Early Hub cash deals also eased to about 15 cents under the front month contract, from deals done late Tuesday at about a 9-cent discount.

Gas on the Transco pipeline at the New York City gate was heard early near $2.22 on volume near 135 mmcf, down 4 cents from Tuesday's $2.26 average and also at its lowest price since September 2009.


Last week'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, still at record highs for this time of year, and more than 700 bcf, or 40 percent, above both last year and the five-year average level.

(Storage graphic:

Withdrawal estimates for this week's EIA report range from 47 bcf to 66 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.


Nuclear plant outages were running at about 19,600 megawatts, or 20 percent, on Wednesday, up from 15,800 MW out a year ago and a five-year outage rate of about 15,200 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.


The National Weather Service six to 10-day outlook issued on Tuesday again called for above or much-above-normal readings for about the eastern two-thirds of the nation and below-normal readings only in the West.

Baker Hughes drilling data last week showed the gas-directed rig count fell for a ninth straight week to a 32-month low of 670.

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

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.