The December aftermarket got off to a very strong start at nearly all points Thursday as the heating season's first major winter storm, having already occupied the western two-thirds of North America, signaled its intention of invading the rest of the continent by early in the weekend. Once again, the 31.2-cent jump by January futures in their prompt-month debut Wednesday added to the fundamental weather support for cash prices.
Gains were more geographically consistent than earlier in the week, although overall they ranged from about a dime to 95 cents. Northeast citygates, which had seen mostly small upticks the day before, were among the leaders of Thursday's advance despite the storm front not being due to reach the region until around Saturday. One source surmised that there must have been some advance stocking up of gas supplies going on in the Northeast, such as replenishing storage accounts.
The cash market again failed to realize an across the board advance as the British Columbia/Pacific Northwest situation continued to ease, producing flat to lower numbers at Westcoast Station 2 and a few Pacific Northwest/Rockies points. Sumas took the biggest tumble of just shy of a dollar as Canadian exports rose. Despite the easing of supply tightness, Sumas still commanded a premium of $2 above the domestic product on Northwest.
The extremely low linepack situation on Westcoast earlier this week, which had caused spikes at Westcoast Station 2 and the Sumas export point Tuesday, had changed so drastically that for Friday's gas day the pipeline revised its imbalance tolerance range to zero pack/20% draft.
Bentek Energy, with its analysis of flows at 14 natural gas hubs (http://intelligencepress.com/features/bentek/), reflected the ongoing restoration of Sumas throughput, noting that nominations for Thursday there had risen by 53,000 MMBtu/d, or 8%. Bentek also reported the Midwest's advance preparation for the arrival of severe cold, saying Chicago citygate volumes for Thursday had risen a whopping 1,281,000 MMBtu/d, or 59%, from the day before.
Reports of recent wellhead freeze-offs in Western Canada were confirmed by industry analysts who said production had been reduced by about 10% over the past fortnight (see related story). Bentek's analysis jibed with that report. Bentek said Canadian exports had fallen to 5.8 Bcf/d Sunday and 5.9 Bcf/d Monday before starting a slow climb back up. That compared with a month-to-date average of 6.9 Bcf/d, Bentek said.
The eastward march of severe winter weather had pipelines adding a slew of OFO-like notices or low-linepack warnings to those already in place (see Transportation Notes).
The Energy Information Administration was within the range of prior expectations but notably above consensus estimates centered on the mid-20s Bcf in reporting a 32 Bcf storage withdrawal for the week ending Nov. 24. Nymex traders were initially bullish about the report, but later went into selling mode, bringing the January contract to a loss of 2.7 cents on the day.
A Midcontinent producer expected cash numbers to keep rising Friday despite the screen fall-off and the usually bearish "weekend effect." He saw Henry Hub trading Thursday afternoon for the weekend around $8.50, about 15 cents above the Hub's Thursday average.
The producer said one Chicago-area utility told him that if the citygate is more than $8 for the weekend, it won't buy spot gas but will pull from storage instead. He doesn't expect to have the utility for a customer, because it looked to him like Chicago would trade at $8.35-50 Friday (it averaged in the mid $8.30s Thursday). He noted that Nicor had lifted its caps for Nov. 30 and at least Dec. 1, allowing customers to bring in incremental supplies that weren't being allowed earlier.
A Northeast marketer said the upcoming intensity of cold on the East Coast won't be as severe as it was while the storm made its way across the continent. He said the big Northeast gains Thursday, more than a day before the storm's arrival, were due to advance buying but also because the cash market "always acts a little odd" for the first day or two of a new month as traders make balancing adjustments for the transition.
A marketer in the Upper Midwest said her company increased its baseload purchases more than usual for December, although it was "not thrilled with the price. Regional forecasts call for freezing cold to stick around through next week, but then for temperatures to be turning more moderate around mid-December. It hasn't snowed in her area lately because highs were in 60s until Thursday, when the thermometer plunged.
An industrial end-user reported making all of his December purchases in the week before Thanksgiving because he had vacation planned for the holiday weekend through this past Wednesday. He indexed everything, almost always at a premium, he said. After some initial Trunkline-East Louisiana pool deals at index plus 3-5 cents, he "jumped on" a later package that had come down to index plus a penny. He also quoted Southern Natural Gas purchases at index plus a penny.
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