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Nuclear Losses, Strong Inventory Figures Continue to Lift Futures

Natural gas futures rose Friday as traders attempted to factor in the loss of generation from the Browns Ferry nuclear plant and continued bullishness derived from Thursday's inventory report. At the close June had risen 12.7 cents to $4.698 and July was up 12.8 cents to $4.761. June crude oil added $1.07 to $113.93/bbl.

As far as nuclear generation goes, Tennessee Valley Authority (TVA) said it's making progress in assessing damage to its power transmission system. An operable transmission system will be addressed first before any restart of Browns Ferry Nuclear Plant Units 2 and 3. The plant in Alabama was expected to be shut for days, possibly weeks, as workers repair damaged transmission lines. According to reports, the backup systems worked as intended to prevent a partial meltdown like the nuclear disaster in Japan.

Reuters reported that 160 tornadoes caused at least 306 fatalities in the region.

About 70 high-voltage transmission lines remained out of service Friday, with some creating dangerous situations because they had fallen across roads. As of late last week, nearly 650,000 homes and business were still without power, primarily in northern Alabama and Mississippi.

On Thursday TVA returned seven damaged transmission lines to service, fixing about 10% of the damage.

The loss of Browns Ferry 2 and 3 couldn't have come at a worse time as more than 28% of the nation's nuclear fleet is down for refueling or repairs. The two Browns Ferry units are just two of the 42 nuclear plants shown as either offline or producing at less than 100% of full power in the NGI's NRC Power Reactor Status Report. The 42 nuclear plants' generation represents a loss of 28,250 MW out of total U.S. capacity of 98,564 MW at104 facilities.

Additional natural gas demand by utilities was on the minds of traders and Thursday's modest 31 Bcf injection also added impetus to the bullish case. Tim Evans of Citi Futures Perspective in New York noted that "this marked the third consecutive bullish surprise in the storage number, confirming a tighter supply-demand balance than anticipated. While we can't be certain what has driven that change, we suspect that the higher rate of nuclear plant outages this year has increased utility demand for natural gas by 1-2 Bcf/d, limiting injections."

Traders see the day's rise as continued momentum derived from the storage report and improved industrial demand.

"The market also appears to be riding the coattails of [Thursday's] storage figure that came in much below average street expectations, a development that suggests non-weather related demand out of the industrial and power sectors may be improving at a faster clip than expected," said Jim Ritterbusch of Ritterbusch and Associates. "In any event, the price up-spike of the past two sessions and today's strong close toward the top of the daily range suggests a market ready to make a run at the late January highs of about $4.85 per the June contract. [Friday's] price action forced us to abandon a bearish stance for now as our stop point was triggered [by] the close above the $4.63 level."

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