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Most Points Rally With Chilly Weather Continuing

Several Northeast trading locations, mostly in New England, fell Monday despite freezing-or-less overnight lows forecast to persist into Tuesday. However, the rest of the market recorded substantive increases -- nearly all in double digits -- due to winter-like cold weather lingering into early spring, April futures strength on the preceding Friday and the return of industrial load from its normal weekend decline also contributed to overall upticks.

The advance ranged from about a nickel to a little more than 40 cents. All of the losses from about 20 cents to nearly 40 cents occurred in the Northeast.

The cash market had bountiful support from Friday's jump of 15.9 cents by April futures. But the Nymex contract, due to expire Tuesday, gave slightly negative guidance for cash that day by retreating 2.9 cents (see related story).

Much cooler temperatures have returned in the South after a relatively warm weekend that had some air conditioning systems being revved up for the first time since last fall. Modest warming trends are under way in the Northeast and Midwest, but conditions will remain cold enough for possible snowfalls Tuesday and/or Wednesday in both regions, according to The Weather Channel. The desert Southwest can expect some downright warmish temperatures, with Phoenix forecast to peak in the mid 80s Tuesday, but the rest of the West will be cool to cold, said Madison, WI-based Weather Central. Subfreezing lows will remain the norm in most of Canada, it added.

Somewhat surprisingly, the Algonquin citygate recorded one of the day's largest losses of about 30 cents, according to IntercontinentalExchange (ICE), but its trading volume on the ICE platform nearly doubled from 112,900 MMBtu Friday to 206,300 MMBtu Monday.

Northern Natural Gas indicated a slow rise in Upper Midwest temperatures early this week, saying average readings of 27 Sunday and 29 Monday were expected to reach 31 Tuesday and 35 Wednesday. That would still be short of its normal system weighted temperature of 38 at this time of year.

Kern River, which experienced some low-linepack issues early last week, reported that linepack had risen to near its maximum-level target over the weekend.

Referring to recent temperature fluctuations in the South, "It's the time of year for big swings in [gas] demand," commented a regional utility buyer. It was pretty chilly in his area Monday, but there should be a gradual warm-up during the week with "kind of nice" weather due by the weekend, he added. His utility had expected to be making storage injections by now, he said, but recent cold spells have precluded that for a while.

The buyer said he already had summer term supply deals set up and didn't expect to buy much spot gas in the next few months.

The National Weather Service's eight- to 14-day forecast for the April 4-10 period, posted Sunday afternoon, indicates below-normal temperatures retreating into the northern half of the U.S. but still dipping far enough southward to include the northern edges of Arkansas, Mississippi, Alabama, Georgia and South Carolina.

Five drilling rigs were added to the U.S. search for natural gas during the week ending March 25, bringing the total to 880, according to the Baker Hughes Rotary Rig Count. Three more rigs were activated in the Gulf of Mexico, while the onshore tally rose by two, Baker Hughes said. Its count is down 3% from a month ago and 6% less than the comparable year-earlier level.

Tudor Pickering Holt analysts noted that the uptick in Baker Hughes' count was the first one in seven weeks.

However, Canaccord Genuity's Cameron Horwitz said that year-to-date, the gas rig count has declined by an average of about three rigs per week, and he expects this trend to continue through year-end, "which suggests a 750-775 gas rig count heading into 2012." He also pointed to near-term weather forecasts turning "decisively bullish for natural gas" as the National Oceanic and Atmospheric Administration calls for 127 heating degree days this week, 51% above last year and 27% above the long-term average. "If the forecast holds, look for a counterseasonal 40-50 Bcf storage withdrawal to be reported" next week.

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