The rally that started the week in most of the cash market proved to be short-lived Tuesday. Although there was still a fair amount of heating load in some northern market areas, modest warming trends and the previous day's small futures decline caused prices to fall everywhere except for a flat Florida Gas Zone 2.
Plummeting numbers at several Northeast locations handily led the downturn; Texas Eastern M-3 and Transco Zone 6's non-New York pool were the only Northeast citygates to fall less than a dime. Overall losses ranged from about a nickel to 65 cents or so.
One sign of easing demand in the Northeast was Texas Eastern ending M-3 imbalance restrictions (see Transportation Notes). Tennessee had previously lifted Friday an Imbalance Warning for Zones 5 and 6.
Transco Zone 6-New York took the biggest price hit, but volumes traded there on IntercontinentalExchange (ICE) increased from 186,200 MMBtu Monday to 251,300 MMBtu Tuesday. And on the opposite coast, ICE said, the PG&E citygate saw a huge activity increase from 917,300 MMBtu to 1,405,300 MMBtu despite a price fall of about a dime.
Nymex traders provided further negative guidance for Wednesday's cash market by pushing the expiring April futures contract 13.4 cents to lower to a settlement of $4.240 (see related story).
A supply reduction in the Gulf of Mexico is expected to be brief and obviously had little impact on the softer daily market. Production was reduced at the Anadarko Petroleum-operated Independence Hub while safety tests are performed on subsea equipment, company spokesman John Christiansen confirmed Tuesday. Although Anadarko does not comment publicly on production figures, Christiansen said Bentek Energy estimates that Independence output had fallen to about 223 MMcf/d from approximately 528 MMcf/d Monday before the tests began looked pretty accurate to him. He added that Anadarko expects to restore the production that was cut around Wednesday or Thursday.
Following a short cooldown period that had begun overnight Sunday, highs were predicted to start approaching 80 again Wednesday at some locations in Texas and Louisiana, although New Orleans was due to see its peak come down from about 83 Tuesday to the high 70s, according to Madison, WI-based Weather Central. Although it would still be on the cool side in much of the rest of the South, slight warming trends are under way there as well. And one source said a friend in Tampa, FL, told him of sweating rather heavily after taking a walk; Florida highs are expected to remain around the mid 80s Wednesday.
Slightly milder temperatures were in the forecasts for Canada and from the U.S. Northeast through the Midwest and into much of the West, although Rocky Mountain highs would remain largely static.
Reporting that her company bought April gas at basis of plus 26 cents and plus 31 cents for deliveries to the Consumers Energy and MichCon citygates, respectively, a marketer commented that at least April futures had been moving in the direction it likes -- down -- over the last two days.
The marketer said the Upper Midwest finally appears to be getting closer to springtime weather. Much of the region is still experiencing subfreezing lows for now but is likely to see temperatures peaking in the 50s before the weekend.
A Midcontinent producer said most of his company's gas has already been committed under its index-based summer request for bids. He added that a recent spell of colder weather should keep area heating degree day usage above normal at least through Wednesday.
ICE said April baseload trading on its online platform showed the Chicago citygate average rising from about $4.36 last Friday to just over $4.51 Monday, for an overall average of about $4.41 during the first two days of bidweek. ICE also reported that the Southern California border was running in the vicinity of $4.25 through Monday. But likely in response to expiration-day futures weakness, averages at the two points retreated Tuesday to about $4.38 and $4.19, respectively, it added.
Both ICE averages were up substantially from NGI's March indexes of $3.95 for Chicago and $3.83 for the border.
Stephen Smith of Stephen Smith Energy Associates looks for the first overall net storage injection of the year to be reported Thursday. He projects a build of 8 Bcf for the week ending March 25, saying that was up from his original estimate of 5 Bcf. Kyle Cooper of IAF Advisors anticipates a larger injection of 13 Bcf, which he said compares with a similar build of 12 Bcf a year ago and a five-year average withdrawal of 30 Bcf.
A report by Southern Natural Gas supports the case for expecting a net injection during the last week. The pipeline said inventory at its two storage fields stood at 31.6 Bcf, or 53% of 60.0 Bcf total capacity, as of March 24. The volume had been 29.4 Bcf (49%) on March 17, Southern added.
However, Citi Futures Perspective analyst Tim Evans expects two more withdrawals -- the latter one fairly large -- to be announced. He predicted pulls of 14 Bcf and 66 Bcf for the weeks ending March 25 and April 1, respectively. That is likely to be followed by injections of 18 Bcf and 34 Bcf for the weeks ending April 8 and April 15, respectively, Evans said in a late-Monday commentary.
Credit Suisse's Hugh Li and Stefan Revielle also think that the Energy Information Administration will report at least one more draw. They projected a 5 Bcf pull based on heating demand having increased last week. U.S. cumulative heating degree days (HDD) jumped by more than 20, or 19%, to 127 HDD. That is more than 15% above average demand levels for the reference week, adding, "While all weather locations we track started the week at seasonal levels, a late-week cold front blanketed the Midwest and eastern states and caused much of the increased heating requirements."
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