For the most, part next-day gas prices moved within a few cents of unchanged in Thursday trading, but factor in hefty declines seen in New England and the East and the market tenor changes.
Overall, the NGI National Spot Gas Average fell 8 cents to $2.30, but $1-plus losses in New England helped skew the market lower. Major market hubs were either flat or down a couple of pennies.
The Energy Information Administration (EIA) reported an outsized 113 Bcf withdrawal in its Thursday morning inventory report, plus a 4 Bcf reclassification, resulting in an implied offtake of 117 Bcf, well above expectations of closer to 100 Bcf. Futures traders took note and at the close February had risen 11.5 cents to $2.382 and March was up 10.5 cents to $2.394. Crude oil traded lower on heavy volume. February shed another 70 cents to $33.27/bbl.
Futures bulls were pleased with the day's trading. "We were expecting a withdrawal of 98 Bcf and it came in at 113 Bcf. Prices rallied and held some solid numbers," a New York floor trader told NGI. "I like the $2.50 area, but the climb could be hard. You could get some downside, but I would look higher."
Mother Nature will have the last word. "It's a weather market," said Tom Saal, vice president at FC Stone Latin America LLC. "People are thinking its going to be an El Nino winter and temperatures were going to above normal the whole winter. That is what pushed the prices down below $2.
"But now I was in Chicago this week and I can attest to people are burning gas. There is demand. We got some cold weather and the market reacted to that, and if we get more cold weather it will react to that as well. This may be the beginning of somewhat higher prices. Any unfilled expectations of an El Nino winter will lead to higher prices.
"The market is expecting an El Nino winter, warm temperatures, not much demand, low withdrawals and lots of gas in storage at the end of the season.
"I always look for extremes in the Commitments of Traders reports. It shows speculators are net short, and they are the culprits for these lower prices. If they can't make any money being short, then they will cover. That's what you look for," Saal said.
He added that Friday's price action was key, and if the market could end trading at the high end of the week's range, that would be an indicator of higher prices next week.
Prior to the 10:30 a.m. EST release of storage data it looked as if the markets might finally have to deal with the season's first triple-digit storage draw, but even that would fall far short of historical metrics. The market was expecting right around a 100 Bcf withdrawal to be reported, but last year 116 Bcf was pulled and the five-year rate comes in at 129 Bcf. Stocks currently stand at 3,756 Bcf, and if inventories are to be whittled down to a seemingly manageable 2,000 Bcf by the end of March, an average 135 Bcf will have to be withdrawn weekly.
PIRA Energy was expecting a withdrawal of 100 Bcf, and industry consultant Genscape calculated a 104 Bcf pull. A Reuters survey of 20 industry cognoscenti revealed an average 99 Bcf decline with a range of -84 to -118 Bcf.
Industry consultant Bentek Energy calculated a 101 Bcf draw utilizing its flow model and said there might be low-side risk to the number "as lingering holiday effects may have lead to some overestimation of demand, though it is unclear what the magnitude of the overestimation may have been, given the already lower than average demand."
Next-day gas in New England fell hard and fell often as temperatures were forecast above seasonal norms. Wunderground.com predicted that the high Thursday in New York City of 45 degrees would slide to 43 Friday and rebound to 47 on Saturday. The normal for early January in New York City is 38. Chicago's 42 high on Thursday was seen inching up to 43 Friday and back down to 42 Saturday, 10 degrees above normal.
Gas at the Algonquin Citygates tumbled $1.02 to $3.74 on hefty volume, and gas at Iroquois, Waddington slid 17 cents to $2.58. Deliveries to Tenn Zone 6 200L shed $1.05 to $3.56, also in active trading.
Gas on Texas Eastern M-3, Delivery fell 71 cents to $1.59, and gas bound for New York City on Transco Zone 6 came in 40 cents lower at $2.61.
Elsewhere, market moves were more benign. Gas at the Henry Hub was flat at $2.35, as was gas at the Chicago Citygate at $2.42. Deliveries to NGPL Midcontinent Pool eased 2 cents to $2.29, and packages at the PG&E Citygate slipped 2 cents to $2.80.
In physical market trading at higher latitudes Northern Natural Gas issued warnings of capacity limitations for Jan. 9, 10 and 11 as cold weather pummeled the Northern Plains. "An SOL [System Overrun Limitation] has been called for all Market Area zones (ABC, D and EF)...due to lower than normal system weighted temperatures," the company said on its website.
Next-day power prices also weakened. Intercontinental Exchange reported on-peak power Friday at the ISO New England's Massachusetts Hub dropped $6.59 to $38.52/MWh, and at the PJM West terminal next-day on-peak power fell $4.69 to $26.81/MWh. Power in Texas on ERCOT North, however, rose $1.37 to $19.98/MWh.
Wednesday evening weather model runs came in a little cooler before the EIA storage report. WSI Corp. in its Thursday morning report said, "[Thursday's] 11-15 day period forecast still features below-average conditions across the southern and eastern U.S. The forecast is a bit colder than yesterday's forecast. CONUS GWHDDs are up 1.2 for days 11-14 and are now forecast to be 153.3 for the period. Forecast confidence is only near average today as there are conflicting large-scale signals and uncertainty with the storm track off the East Coast.
"The prevailing negative NAO/AO supports a general risk to the colder side, which is greatest over the southern and eastern U.S. The northern Rockies and north-central U.S. has a slight upside risk."