With an arctic air mass poised to deliver what The Weather Channel called "some of the coldest weather the region has experienced in a year or two" into the Northeast Thursday, several citygates there saw huge spikes in Wednesday trading. Transco's Zone 6-New York City pool saw a top quote of $30 as the point's average soared by more than $11 to just over $20.
Otherwise the cash market was mixed and close to flat in nearly all cases. Gains ran as high as a little more than 30 cents, although a majority were in single digits. Losses peaked around 15 cents. Nearly all western points were flat or lower.
Zone 6-NYC saw a tremendous trading range of nearly $18 as its low quote was $12.30. The ranges at New England citygates were quite a bit smaller, but those points also saw hefty jumps of nearly $4 or greater.
A bit of weather moderation along the West Coast helped explain the general western softness. And according to one producer, greater incentives to take gas out of storage was one reason for this week's rally to have largely stalled in the Gulf Coast and Midcontinent/Midwest.
Low temperatures in the Northeast Thursday will be in the teens or less, while such locations as Albany, NY, Burlington, VT and Caribou, ME are forecast to experience below-zero readings.
The cash market had prior-day futures support for four straight trading days, but that is ending as the February contract dropped 17.6 cents Wednesday.
While the Midwest is expected to have frigid weather comparable to the Northeast's, Midwest numbers saw little movement Wednesday. A Midcontinent producer said the price disparity was mostly due to the Northeast having significantly less storage availability than the Midwest. Also, while Northeast temperatures will be as much as 20 degrees below average Thursday, Midwest conditions are much closer to average for this time of year, he said.
The producer said New York City quotes soared much higher than others because of restrictions on deliveries. He said a trading counterparty told him that Transco essentially is not allowing imbalances, having set a pool tolerance of 1%. In addition, Texas Eastern and Algonquin are currently not allowing any creation of due-pipeline imbalances.
A couple of weeks ago the cash market was in contango, with January prices cheaper than Nymex's near-month strip, the producer continued. That situation no longer exists, especially with Henry Hub trading nearly even with February futures Wednesday morning and averaging nearly a nickel above the screen settlement at the end of the day, he said. Formerly, storage holders had incentive to keep their gas in place if possible, but that's been reversed now that the market is no longer in contango, he said.
With bidweek looming, the producer said he did a Consumers Power deal Wednesday morning for January at basis of minus 11.5 cents, but the basis had weakened to minus 13 cents by the afternoon. He was seeing next-month MichCon basis at minus 20 cents. Both Chicago and Panhandle Eastern traded at index minus 0.75 cents, he said.
Although it may not turn much of the cash market around, Thursday's storage report is expected to be bullish because it will take a big bite out of the year-on-year surplus following several weeks of surplus growth. Ron Denhardt of Strategic Energy & Economic Research expects a withdrawal of 174 Bcf to be announced for the week ending Jan. 19. Reuters found an average expectation of a slightly larger 176 Bcf pull in its survey of 18 industry analysts. The news service said the estimates ranged from 150 Bcf to 201 Bcf. The comparable week last year saw 76 Bcf taken out of storage.
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