As expected, exceptional support from a prior-day 80.3-cent futures spike allowed the February cash aftermarket to get off to a strong start by rallying at most points Wednesday. The show of firmness got an extra boost from icy precipitation moving into much of the Southeast Thursday, adding to already existing cold-weather demand.
Retreats of nearly 60 cents at some Northeast citygates (and at the Florida citygate now that Florida Gas Transmission has ended an Overage Alert Day) averted across the board increases. Otherwise, gains were solidly in double digits, ranging from a little more than a dime to about 65 cents. With a large majority of them between 30 and 50 cents, there was little variation of strength among geographic market areas.
Northern Natural's demarc and Ventura points scored some of the day's largest gains of about 55 cents. A posting on the pipeline's bulletin board helped illustrate why. The normal system weighted temperature at this time of year is 17 degrees, Northern said. It projected that the weighted temperature would be 13 degrees Wednesday and fall to 9, zero and minus 2 from Thursday through Saturday.
The rapid descent of Transco Zone 6-New York City from its $30 heights on two days last week slowed considerably. The point still recorded some $10-plus quotes Wednesday but is no longer averaging in quadruple digits.
Fresh masses of arctic air are due Thursday from the western Upper Midwest through the northern Plains and northern Rockies. The Northeast will actually be enjoying a bit of moderation prior to the next onslaught of cold.
The market is bracing for what is expected to be the coldest week of the heating season so far next week, with the most severe conditions concentrated in the key gas-consuming areas of the Midwest and Northeast. That means overall price firmness is likely to continue into at least the middle of next week, despite a futures decline of 7.3 cents Wednesday. The March natural gas contract fell despite continued strength in Nymex's petroleum product offerings.
But some doubt was starting to surface about the staying power of the upcoming blast of cold. A marketer in the Upper Midwest said a new forecast for her region indicated that instead of a 15-day period of extreme cold as expected earlier, the weather may start to moderate again after as little as five days.
The marketer said her company was rather surprised at the weakness of February basis at Michigan citygates. Her company paid basis of plus half a cent for Consumers Power deliveries and minus a nickel at the MichCon citygate.
In its six- to 10-day forecast for the Feb. 5-9 workweek, the National Weather Service (NWS) expects below-normal temperatures everywhere east of a line curving southeastward along the western Montana border through southwest Wyoming and the northeast corner of Colorado before turning south through the southwest corner of Kansas and the eastern end of Oklahoma's Panhandle and dividing Texas down the middle. It looks for the greatest deviations from normal conditions throughout the Northeast and in the eastern end of the Midwest. NWS predicts above-normal temperatures in the southwest quadrant of the nation west of a line running from central New Mexico to northwest Oregon.
A Reuters survey found an average expectation of a 200 Bcf storage pull to be announced for the week ending Jan. 26. The range of estimates by 23 industry players was 165-225 Bcf, the news service said. Bentek Energy said it is projecting a withdrawal of 207 Bcf in the upcoming report.
Analyst Stephen Smith raised his original forecast of a 191 Bcf draw to 196 Bcf. Due to travel requirements, the first estimate was made Jan. 26 and based partly on preliminary heating degree day (HDD) estimates for the first few days of the following week, Smith explained. The actual HDD tally for Jan. 27-30 turned out to be higher than his estimates, he said, and "the incremental required pipeline shipment initiations produced a stronger storage draw than we originally estimated for the week ending 1/26/07."
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