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Cash, Futures Part Ways; January Retreats 6 Cents

Physical gas for Friday delivery was mostly higher in Thursday's trading, although some moderate weakness was noted in the Midwest and California. The strongest gains were seen at New England points, where prices surged over $1 amid forecasts of steady power loads and higher peak prices as well as a trend to cooler temperatures. The overall market gain was 6 cents.

What a difference a year makes. The Energy Information Administration (EIA) in its 10:30 a.m. Thursday report on storage inventories reported a withdrawal of just 64 Bcf, only one-fourth the polar vortex-driven pull of a year ago, but also only 40% of the five-year average. Although the number was a greater draw than expected by a few Bcf, futures prices ended in the red. January shed 6.0 cents to $3.642 and February lost 4.8 cents to $3.676. January crude oil reverted back to its losing ways dropping $2.36 to $54.11/bbl, another five-year low.

Gas for New England delivery Friday rose as forecasters called for a trend of declining temperatures into the weekend; next-day peak power rose, and forecast power loads held steady.

Forecaster Wunderground.com predicted that Boston's Thursday high of 43 degrees would slide to 36 Friday and reach 37 on Saturday, 3 degrees below normal. New York City's Thursday high of 42 was seen dropping to 38 Friday and 37 Saturday. The seasonal high in the Big Apple is 42. Philadelphia's 41 high on Thursday was expected to hold Friday before dropping to 38 on Saturday, 4 degrees below normal.

Friday gas at the Algonquin Citygates gained $1.34 to $6.36, and deliveries to Iroquois Waddington added 9 cents to $4.13. Gas on Tennessee Zone 6 200 L rose by $1.53 to $6.35.

Gas bound for New York City on Transco Zone 6 rose by 4 cents to $3.76, and deliveries to Tetco M-3 added 5 cents to $2.97.

Next-day peak power posted solid gains in New England and the Mid-Atlantic. IntercontinentalExchange reported that Friday peak power at the ISO New England's Massachusetts Hub jumped $10.04 to $53.88/MWh, and next-day peak power at the PJM West terminal rose by $1.66 to $41.92.

Power loads held firm. Thursday peak load at the ISO New England's Massachusetts Hub was seen at 18,250 MW and was expected to ease only slightly to 18,190 MW Friday, according to the ISO. By Saturday, loads were forecast to drop to 17,440 MW. The New York ISO said peak Thursday load of 21,444 MW was anticipated to soften to 21,404 MW Friday before falling to 20,106 MW Saturday.

Next-day gas in the Marcellus was mixed. Gas on Millennium fell 8 cents to $2.22, and deliveries to Transco Leidy fell 6 cents to $1.91. Gas on Tennessee Zone 4 Marcellus was off 6 cents to $1.90. On Dominion South, Friday gas changed hands at $2.47, 3 cents higher.

The National Weather Service in suburban Philadelphia reported an active weather environment going forward. "High pressure from the Great Lakes builds over the northeast through the weekend. Low pressure will pass south of the area Monday and Monday night. Strong low pressure will impact the region Tuesday night through Wednesday night."

In spite of never-ending price movements, observers had for the moment a sense of tranquility, perhaps generated by the onset of the Holiday Season. Although producers could always use higher prices, the transportation and marketing segments of the industry seemed to be at ease. "The phones are quiet," said a Houston-based industry veteran. "That's a good thing. It means that the customers are getting all the gas they need.

"Things may get a little dicey next year when the repercussions of the oil price fall hit. Some of our customers have oil production subsidiaries, and they are smarting," he said.

Next-day gas in the Midwest was weaker. Deliveries on Alliance fell a penny to $3.83, and gas at the Chicago Citygates shed 4 cents to $3.77. At Demarcation, Friday parcels came in 1 cent lower at $3.77, and gas on Northern Natural Ventura was also seen a penny lower at $3.77.

Going into the Thursday morning release of storage data by the EIA, traders had bid the futures market higher by about 5 cents and once the 64 Bcf withdrawal figure hit the market, prices added another five cents to $3.805. The number was slightly higher than industry expectations but well below historical comparisons.

Prior to the release of the data, analysts were looking for a decrease of about 60 Bcf. An analysis by ICAP Energy revealed a pull of 63 Bcf, and IAF Advisors analysts calculated a 61 Bcf decline. Bentek Energy's flow model anticipated a withdrawal of 60 Bcf.

"We were looking around the 60 Bcf level, and the market was trading around $3.755 when the number came out. This wasn't much of a higher push at all," said a New York floor trader. "We are still in our $3.50 to $4 trading range."

Citi Futures analyst Tim Evans viewed the report as supportive. "The 64 Bcf net withdrawal was moderately above the 60 Bcf consensus expectation, implying a slightly firmer supply-demand balance that may carry over into future weeks."

While Thursday's report may not have much market impact, Teri Viswanath, director of natural

gas commodities strategy for BNP Paribas, said, "the market is looking beyond the string of low weekly storage withdrawals to more significant stock reductions ahead."

Inventories now stand at 3,295 Bcf and are 6 Bcf greater than last year and 258 Bcf below the five-year average. In the East Region 55 Bcf was withdrawn, and the West Region saw inventories increase 1 Bcf. Stocks in the Producing Region fell by 10 Bcf.

According to forecasters, the Christmas cold is still on, but there are difficulties trying to figure out exactly what happens prior to its arrival. In a Thursday morning report, Commodity Weather Group President Matt Rogers said, "Changes in storm systems and cold front timing continue to hound the boundary between the current warm pattern and the incoming colder one. The models continue to fluctuate, but the general theme over the past few days has been to amplify the warming ahead of the big cold switch, and today is not an exception, for the East Coast and South especially.

"Warmer changes right around the Christmas holiday still pose some lower demand risks. Meanwhile, the new cold pattern is pouring into the Plains starting middle six-10 day now and reaching the Chicago area by days eight-10. The various ensembles continue to be in excellent agreement on building and then holding the new Alaskan ridge pattern through the end of the period. They vary on cold-supporting cast members like the Greenland and gate-keeping ridging, but they all agree on cold troughing focused around the Midwest to East."

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