Many points were flat or close to it Wednesday in a cash market that also saw gains of up to about 30 cents and losses of as much as about 35 cents. Overall, a modest majority of quotes were lower as the weakness of weather and storage fundamentals and a prior-day screen dip began to weigh on the nascent February aftermarket.
Despite the general softness, Wednesday's spot prices were at a premium to first-of-month indexes at most points (Northeast citygates and NGPL-Louisiana were the exceptions in trading below index). In January daily quotes wasted no time in falling to triple-digit deficits from index and stayed that way all month.
With most areas expected to continue experiencing above normal temperatures Thursday, bearish storage report expectations and a 59.3-cent Wednesday dive in March futures, most if not all points are considered likely to be united in descent Thursday. However, a rally could be in the cards Friday as colder weather is predicted to begin moving into northern market areas over the weekend.
"I would assume" that all cash numbers will be softer Thursday due to the weakness not only of the natural gas screen but all of Nymex's energy futures complex, said a Houston-based marketer. Temperatures will be dropping, but it's not going to get as cold in the Midwest this weekend as previously expected, he said. However, a major cold spell is forecast in the region for the following weekend, he added. So far there haven't been any transportation hassles in February and "everything is flowing freely," the marketer said.
A Midwest trader said she had to guess that it was crude oil weakness that dragged natural gas futures lower Wednesday afternoon after they had been much stronger that morning. Her area would be in the 40s Wednesday and Thursday, she said, "and then we're looking for some more winter-like weather" around the weekend.
A Northeast marketer acknowledged that while it's not a guarantee of lower cash prices Thursday, the dive in futures indicates that will happen. This is especially likely because the screen will be so much lower when cash trading resumes Thursday than it was during Wednesday morning's session, he said.
The National Weather Service's (NWS) forecast for the Feb. 6-10 workweek calls for below normal temperatures in Florida and virtually all of South Carolina, Georgia and Alabama (except for their northern edges) along with southeast Louisiana and the southern half of Mississippi. The agency also predicts below normal readings in New Mexico, the southwest corner of Texas and most of northern Arizona. Expect above normal conditions across the northern tier of states along with Oregon and the northern two-thirds of California, and also in much of the central Plains, NWS said.
Global Insight analyst Jim Osten predicted a storage withdrawal of 91 Bcf to be reported for the week ending Jan. 27, and farther out he expects a smaller pull of 70 Bcf for the week ending Feb. 3. Heating degree days (HDD) averaged 22% below normal nationwide last week, Osten said, with all regions posting below-average HDDs. "The National Weather Service is forecasting even milder weather this week, with HDDs across the United States expected to average 32% below normal," he added.
Reuters news service said its survey of 21 industry players found withdrawal estimates in the range of 77-102 Bcf for Thursday's report, yielding an average guess of 87 Bcf. Citgroup's Kyle Cooper made a final estimation of 78-88 Bcf.
Whatever number the Energy Information Administration reports, if it's anywhere near prior expectations it will be considered quite bearish because of lagging far behind historical comparisons (see futures story).
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