Physical natural gas prices for Friday delivery on average eased in Thursday's trading as traders elected to get deals done ahead of the Energy Information Administration (EIA) storage report.
A modest decrease in demand on Algonquin Gas Transmission prompted declines at New England points, but in the Mid-Atlantic, prices soared as temperatures Friday were expected to be close to 20 degrees below normal. Overall, the market eased 8 cents to $4.10.
The EIA reported a storage withdrawal of 160 Bcf, a bit less than what the market was expecting, and futures prices slumped. At the close, March finished 8.4 cents lower at $2.713 and April was off 8.1 cents to $2.733. March crude oil rebounded, adding $2.37 to $51.21/bbl.
In the Mid-Atlantic, next-day gas vaulted higher as forecasters called for a sharp drop in temperatures Friday. Forecaster Wunderground.com said New York City's high Thursday of 39 degrees would plunge to 22 Friday before recovering to 38 on Saturday. The normal high in the Big Apple is 41 at this time of year. Washington, DC's Thursday high of 39 was predicted to fall to 29 Friday before rising to 43 Saturday. The normal high in the nation's capitol in mid-February is 46.
Gas headed to New York City on Transco Zone 6 jumped $4.84 to $20.06, and deliveries on Tetco M-3 added 89 cents to $9.57.
In the Marcellus, prices eased. Gas on Millennium was down a penny at $1.74, and gas on Transco Leidy shed 8 cents to $1.59. Deliveries to Tennessee Zone 4 Marcellus were down 24 cents to $1.37, and gas on Dominion South was off 9 cents to $2.74.
The National Weather Service serving Baltimore and Washington, DC, said, "a cold front has pushed offshore this afternoon. High pressure will gradually build in behind the front late tonight into Friday. A stronger cold front will bring a reinforcing surge of Arctic air Saturday night into Sunday. High pressure crosses the area Monday...then a low-pressure system looks to cross the region Tuesday and Wednesday."
Parcels into New England eased as demand was reported down slightly. Gas at the Algonquin Citygates shed $1.10 to $18.17, and deliveries to Dracut slipped 75 cents to $17.26. On Tennessee Zone 6 200 L, gas changed hands at $17.72, down $1.48.
According to industry consultant Genscape, "New England demand is at 3.7 Bcf/d for [Thursday], down slightly from Wednesday and 0.5 Bcf/d below this winter-to-date's peak set on Feb. 2."
In addition flows from Canada appear to have been restored, adding to additional price softness in the area. Genscape said that previous concerns about interrupted production from the Deep Panuke platform off Nova Scotia had been addressed as "flows from that area on Maritimes [and Northeast pipeline] through the Baileyville border started showing signs of recovery yesterday and appear fully restored in [Thursday's] nominations."
Futures traders saw the day's weakness prompted by a less-supportive EIA inventory as a result of the bears trying to reinstate their case. "The bears are trying to load their guns. They think that if they can push it under $2.75 and keep it there, they might be looking around the $2.50 level," said a New York floor trader."
In a meeting with CME, traders got more clarification on the format of the end of floor trading. In contrast to a similar meeting in Chicago last week, "there was no ranting or raving, nobody got out of hand," the floor trader said. "Basically, they told us what we already knew. Block trades (50 contracts or more) you can still do because you can't do those open outcry anyway. You basically search out a counterparty and say you have a market on a block.
"EFPs [exchange of futures for physicals] they are still doing the same way, and the one thing guys did bring up was one- and two-lot strips or back month spreads that you really can't find on the screens because there is no market for it. Those guys are out of luck because if you can't block them, then you can't do them. You either block them here [the floor] or block them on Clearport. You can't do it on Globex because there are no strips there. They may be able to do something on CME Direct, another CME venue. CME did say they would try to accommodate the smaller customer, otherwise the smaller customer is done.
"They are not getting rid of the actual floor, and traders will be in booths on the perimeter of what were the trading pits. If you are trying to do a block trade, you IM the guy two booths down and tell him you are looking for a block. You make a market and then you go over and block it. You bring it to the exchange and they post it."
The trader added that CME was trying to get rid of all the expensive wallboards and electronics they weren't using to try and save money. "[Terrence] Duffy, CME president, says he considers this [Chicago and New York] one outfit, so if he's keeping Chicago open he is keeping New York open."
Overnight weather forecasts for the end of the month turned still colder. WSI Corp. in its Thursday morning 11- to 15-day report said, "[Thursday's] 11-15 day period forecast is generally colder than the previous forecast, especially across the Plains, Midwest and Northeast. This is due to model trends and the day shift. Forecast confidence is considered near average as medium-range models are in reasonably good agreement with the stable and cold pattern. As usual, there are technical and timing differences.
"The forecast is pretty aggressive with the cold, so there may not be much more room for further downward revisions. The South and East Coast may run a bit warmer, as well as California. The Northwest and Rockies may run a bit colder."
The 10:30 a.m. EST release of inventory figures for the week ended Feb. 6 by the EIA was anticipated to show usage nowhere near the polar vortex-driven period of last year, but consensus estimates still showed a draw below the five-year average. Last year, a humongous 234 Bcf was withdrawn, and the five-year average pace is a 178 Bcf pull.
Bentek Energy's flow model was relatively low in its estimate of a 156 Bcf withdrawal. The firm cited something of a disconnect between the cold weather of last week and its sample of storage facilities. "Below-normal temperatures during the week in the East increased withdrawals from storage compared to the previous week. However, this was offset partially by nearly no net storage activity in the West Region due to above-normal temperatures during the week.
"Even with the majority of the cold weather centered over the Northeast, facilities in the region, such as Dominion and TCO, failed to report their strongest withdrawals of the season, while fields in the Midwest increased withdrawal activity only marginally compared to the previous week and also kept sample activity lower compared to high-demand weeks this year.
"The sample activity for the week suggests risk toward a weaker withdrawal. However, withdrawals from facilities within Bentek's sample increased only marginally within the Producing Region, indicating only a modest uptick in demand within the region," the firm said.
Other estimates included IAF Advisors at a 166 Bcf estimate and ICAP Energy predicted a pull of 170 Bcf. A Reuters poll of 21 traders and analysts revealed an average 168 Bcf with a range of -149 Bcf to -181 Bcf.