The cash market once again displayed amazing resilience in achieving increases -- most of them fairly substantial -- at all points Friday. In doing so, it swam against the negative tide of milder weather returning to key northern market areas, prior-day screen weakness, a highly bearish storage situation and the usual decline of industrial load over a weekend.
Only a couple of points failed to rise by double digits as quotes ranged from a nickel to a little more than half a dollar higher.
Although nearly all of the U.S. would again be experiencing temperatures above seasonal norms over the weekend, the Northeast is expected to be in cooldown mode again early this week, so maybe regional buyers were anticipating growing heating load around Monday, one source suggested. Another said cash may have been attempting late-month convergence with the screen. Henry Hub's rise to the high $8.10s left it a little more than 20 cents back of expiration-day futures.
The South was due to be wet but mild through the weekend, but like the Northeast should be seeing below-average temperatures early this week, The Weather Channel said. Windy and stormy, but moderate outside the mountain areas, were the weekend weather watchwords for much of the West, while the Midwest could expect to be chilly but remain above freezing for the most part.
Northern Natural Gas indicated its service area would be getting significantly colder over the weekend, although it would still be warmer than usual. With a normal late-January system weighted temperature of 16 degrees, the pipeline said the average was way above normal at 40 degrees Friday, but would be slipping to 32 Saturday, 29 Sunday and 27 Monday.
Not only has the current heating season been highly unusual for its paucity of low-linepack OFOs so far, but Florida Gas Transmission was cautioning customers of a potential Underage Alert Day notice due to high linepack and low market-area demand.
A Midcontinent producer said the only rationale he could offer for stronger prices Friday was that the screen had been below $8 for much of the time while cash was trading Thursday, but was half a dollar or so above that Friday morning, creating a sort of psychological bullishness. It's been a real quiet bidweek, he continued, and he is looking for February indexes to be down $2-3.
After a downward trend earlier, bidweek numbers were turning higher Friday, largely as a function of the energy futures complex rebound, the producer said (the expiring February natural gas contract finished the day up 17.1 cents to $8.400, goaded by a dollar-plus crude oil advance along with strong gains in heating oil and unleaded gasoline). He reported having sold into Panhandle Eastern in the upper $6.60s Thursday and said the numbers were about a dime higher Friday. He had the sense that most traders were trying to finish their February business before going home for the weekend.
A Northeast utility buyer said oil might be providing a floor for cash gas prices because fuel switching to gas from oil is still attractive at their relative burnertip prices. He also suspected there was some storage injection demand in play because prices have fallen so far. But the key there, he cautioned, is "if you can," inject," meaning your account has some space available.
It is still winter, "theoretically," the buyer laughed. He said his company was fortunate in being able to reduce its February takes under a winter term contract if needed. "Time will tell if we get colder weather in February" that helps facilitate the use of storage, he added. His city had "a little bit of snow on the ground," but normally drifts would be building a lot higher by now,
Citigroup analyst Kyle Cooper said his initial estimation of the storage report for the week ending Jan. 27 calls for a withdrawal in the upper 80s Bcf.
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