It's not exactly going to be "warm" in northern market areas Friday, but the fact that it will be "warmer" was enough to cause prices to fall at all points Thursday. The previous day's 1.2-cent decline by March futures added a small amount of negative guidance for the cash market Thursday.
Volatile Northeast citygates led the charge downhill in drops ranging from about a nickel to a dollar.
Such locations as Chicago and Detroit in the Midwest will stay below freezing Friday, while Boston and New York City in the Northeast will peak around the freezing level. However, in most instances in the two regions temperatures will be a bit higher than Thursday's and a lot higher than in the first half of the week. The Midwest will be first to see thermometer mercury levels turn south again this weekend, followed by the Northeast early next week.
The already fairly mild South is growing even milder, with highs in the 60s and 70s prevalent Friday. However, it will join the northern market areas in dropping temperatures around the middle of next week after a strong cold front sweeps through from the southern Plains, according to The Weather Channel.
The Rockies is another area where the weather is getting milder, although lows will remain below freezing Friday. Most of the rest of the West is seeing relatively little change in temperatures.
The Energy Information Administration was in line with consensus expectations in reporting a storage withdrawal of 172 Bcf for the week ending Feb. 15. Nymex traders again tested resistance above $9 before retreating to a daily loss of 7.4 cents in March futures.
As one sign of a softening market, Northern Natural Gas said it will lift an OFO-like restriction Friday (see Transportation Notes). The pipeline's Ventura point recorded the biggest drop outside the Northeast of nearly 45 cents but still commanded a premium of about 45 cents over Northern Natural-demarc.
Another indicator of how demand was dropping in the Midwest was Thursday's plunge of Chicago citygate volumes by a whopping 518,000 MMBtu/d, or 11%, according to Bentek Energy's U.S. Natural Gas Hub Flows report (http://intelligencepress.com/features/bentek/). Chicago prices fell over 30 cents Thursday following a drop of 28 cents Wednesday.
A Gulf Coast producer said it was plausible to assume that market-area buyers were making the maximum allowable withdrawals from storage earlier this week and still having to supplement that with hefty purchases of spot gas while daily low temperatures were hitting the teens, single digits and occasionally the sub-zero area. And although it will still be pretty cold in the Midwest and Northeast Friday, the reduction of heating load since midweek means the buyers need less spot gas now to supplement their storage use, he said. He also thought the sharp downturn by April crude oil futures Thursday only a day after the expiring March contract set a record all-time high had a psychological softening effect on the cash gas market.
Although prices were down overall, a Midcontinent producer said they were making a rally attempt early in Thursday's trading, only to fall later before making one last attempt at the upside again late in the session. He looks for prices to continue sinking Friday, citing Thursday's screen weakness, warming trends continuing at least part way into the weekend in the Midwest, and the weekend decline of industrial demand becoming a factor. There's still a substantial lack of liquidity in trading on OGT, keeping it one of Midcontinent's highest-priced points, he noted.
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