Several points in the Gulf Coast and Appalachia continued to move higher Thursday, but for the most part the cash market was in retreat as glimmers of a break in the frigid weather that has kept much of the U.S. and Canada in its icy grasp this week surfaced on the horizon.
Spot prices fell throughout the West and across most of the East, with declines ranging from about a nickel to a little more than $2.50. Transco Zone 6-New York City, which had helped lead the charge higher in the past two days, also was out in front on the descent, even though Big Apple temperatures are to remain below freezing Friday.
Henry Hub was among a few flat points in the Gulf Coast. Otherwise the minority gains ranged from about a nickel to just below a dollar. Florida Gas, Southern, Transco (Louisiana and Alabama/Mississippi points), Tennessee 500 Leg and Texas Eastern-East Louisiana were particularly strong in the Gulf Coast, as was Dominion in Appalachia.
Storage withdrawals last week fell just shy of establishing a new record. The Energy Information Administration reported a 259 Bcf pull for the week ending Feb. 9, which was 1 Bcf short of the current record set in January 1997. The volume jibed fairly well with previous expectations and obviously was already well factored into futures trading psychology. The March contract meandered slightly to either side of flat for most of the morning before beginning a climb that took it as high as $7.380, but the daily settlement was $7.292, up 5.1 cents.
OFO-like transportation constraints related to weather are starting to fade. Northern Natural Gas said it will end a System Overrun Limitation Friday, causing the Ventura point to plunge a little more than a dollar (Ventura still maintained a premium of about 15 cents to the pipeline's demarcation point). Southern was still undecided about whether it would extend an OFO beyond Friday.
Florida Gas Transmission still had an Overage Alert Day in place through at least Thursday, though, and Florida Gas Zone 3 responded with a spike of nearly a dollar.
Kern River fell about 15 cents despite low linepack in most of its system. The pipeline said linepack had decreased by approximately 100,000 Dth during Wednesday's gas day, which it attributed to "supply shortages and drafting by delivery point operators." The "supply shortages" reference suggested that wellhead freeze-offs could be occurring in the Rockies, but that could not be confirmed.
Total western softness was easily explainable as The Weather Channel said, "Temperatures will be above average across much of the West Friday through the weekend." Frigid conditions will remain a while longer in most of the East, but moderating trends should begin by the end of the weekend.
California's Division of Occupational Safety and Health has authorized Occidental Petroleum (Oxy) to begin operations to restore full production at its Elk Hills, CA operation following a Feb. 6 rupture of gathering lines that resulted in fire (see Daily GPI, Feb. 9), an Oxy spokesman said Wednesday. About one-half acre of the 75-square-mile field was directly impacted, but apart from the affected gathering lines, no other production or processing facilities were damaged. The spokesman said some of the lost production had already been restored, but declined to comment on volume impacts.
A Gulf Coast producer noted that "you'd expect a lot of softness for a long holiday weekend" with the weather forecasts turning milder, but she saw potential for some pockets of strength remaining. After all, she reasoned, it's still going to be pretty cold in northern market of areas. She buttressed her notion for a bit of firmness Friday by noting that the screen was up more than a dime in after-hours trading Thursday afternoon.
But there's no doubt that most, if not all, of the market will be headed downhill, the producer said. She observed that Henry Hub was trading "way down for the weekend," saying the last Hub deal she saw on ICE was at $8.15, more than 75 cents below Thursday's average. That's still a hefty premium to where March futures wound up ($7.292), so there's still a lot of cash/screen convergence to accomplish still ahead, she said. She also reported that "a lot of Henry Hub gas" was traded for the rest of the month at an average around $7.56.
Gulf Coast producers who went into February with swing positions have done really well, she said. It's going to take a tremendous decline to bring spot prices back down to first-of-month index levels, she added. That was confirmed by NGI numbers, in which a sizeable majority of Gulf points held triple-digit premiums to index, with most Louisiana locations $2-3 or more higher.
A marketer in the Upper Midwest said Michigan didn't get as much really bad weather as the Midwest area to the south, so that (along with the Wolverine State's abundant storage) is why Michigan citygates weren't seeing nearly as much price strength as the rest of the market this week. Some people may think this is the last of severe winter weather, she added, "but I don't think we're out of the woods yet."
The Weather 2000 consulting firm also provided some support for market bulls, saying in a Thursday advisory: "The contiguous U.S. is now more than 50% covered in snow-pack, more than any of the past several winters at this date in time. The thermodynamic properties of snow and ice are multifaceted and provide a powerful (and largely ignored) cooling effect that can last for many days."
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