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Widespread Cash Losses Outside of New England; Futures Down

Natural gas for weekend and Monday delivery fell in most regions of the country in Friday's trading. Stout gains were limited to a few points in the capacity-constrained New England region.

The Northeast showed the greatest gains with a couple of locations perched above $30, and in spite of a large storm forecast to hit the region over the weekend, eastern prices were generally lower. California, the Rockies and the Gulf Coast were all lower, and points in the San Juan and Permian basins previously impacted by freeze-offs all showed losses of 15 cents or more. Futures prices weakened. January dropped 5.8 cents to $4.351, and February was down 5.1 cents to $4.350. January crude oil fell 90 cents to $96.60/bbl.

The greatest price gains were seen in New England as a broad storm was forecast over the weekend. "Heavy snow and travel disruptions will spread from St. Louis to Pittsburgh Friday night, then to Philadelphia, New York City and Boston Saturday. The snowstorm will span more than 1,000 miles," said AccuWeather.com meteorologist Alex Sosnowski.

"Thanks to recent Arctic air making roads and sidewalks much colder compared to previous storms, enough snow to shovel and plow is in store from parts of Missouri, Illinois, Indiana, West Virginia, Virginia, Maryland and New Jersey to much of Ohio, Pennsylvania, New York, Massachusetts, Connecticut, Rhode Island, Vermont, New Hampshire and Maine. However, farther northeast along the I-95 corridor, the change to rain following snow and/or a wintry mix will take longer, leading to several inches accumulation and more widespread slippery travel.

"A general swath of six- to 12-inch snowfall is likely to reach from part of central Pennsylvania through the Pocono and Catskill mountains and into much of the Hudson Valley of New York, northern Connecticut, central and western Massachusetts,Vermont, New Hampshire and Maine. Locally higher amounts to 18 inches are possible in central New England. In much of New England, the storm will linger into Sunday with ongoing travel disruptions. While flurries will occur over the central and southern Appalachians and downwind of the Great Lakes over the Midwest, the storm will be over across the Ohio Valley and coastal mid-Atlantic, and travel conditions will improve."

Con Edison in New York said crews were preparing to respond to any outages that may occur due to the combination of snow, wind and freezing rain that could hit New York City and Westchester County over the weekend.

Soaring power prices kept New England power generators utilizing natural gas. IntercontinentalExchange reported that power for delivery Monday into the New England ISO's Massachusetts Hub jumped a stout $44.78 to $249.00/MWh. Power into the New York ISO's Zone G (eastern New York) delivery point added $41.01 to $165.00/MWh.

Temperatures throughout the East were expected to be well below normal. AccuWeather.com forecast that Boston's Friday high of 32 would fall to 25 Saturday before dropping to 22 Monday. The normal high in Boston is 42. New York's Friday peak of 33 was anticipated to ease to 21 Saturday before dropping to 29 Monday. The normal high in New York is 43. Philadelphia's high of 35 on Friday was predicted to rise to 36 Saturday before sliding to 30 on Monday. The seasonal high in Philadelphia is 46.

Quotes at the Algonquin Citygates added $6.64 to $33.14, and gas upstream at Iroquois Waddington added $1.80 to $16.26. Weekend and Monday gas on Tennessee Zone 6 200 L rose by $6.53 to $32.75.

Farther south, gas was quoted lower with the exception of New York City. Deliveries to Transco Leidy fell 2 cents to $3.11, and gas on Dominion was unchanged at $3.63. On Tetco M-3 deliveries for the weekend and Monday came in at $5.81, down 83 cents, but gas bound for New York City on Transco Zone 6 added 58 cents to $7.20.

In the Southwest, points previously impacted by freeze-offs and impaired production fell. Gas for weekend and Monday delivery on El Paso Permian shed 15 cents to $4.31, and gas on El Paso S Mainline fell 28 cents to $4.55. Gas on Transwestern was seen 15 cents lower at $4.36, and deliveries on Transwestern San Juan dropped 20 cents to $4.41.

Futures traders see a supported market in spite of the day's declines. "It looks like there was a little bit of profit-taking here at the end of the week," said a New York floor trader. He cautioned that falling below Thursday's settlement "probably wasn't a good thing but you never know. I think we are looking at a pretty big [storage] number next week, so I think traders will be reluctant to short this market."

He also noted that the March-April spread "has blown out this week from 5 cents to 20 cents and with that and the high storage number maybe we'll trade down to the $4.20s, but after next week's storage number I wouldn't be surprised to see us trading back at $4.40 when the number comes out on Thursday. The high spread leads me to believe that we've got more upside over the next four to six weeks. That spread could go to 35 or 40 cents."

The Energy Metro Desk (EMD) Early View Storage estimate for next week showed an average of 256 Bcf from a survey of 17 traders. The range on the survey was from 200 to 280 Bcf. Last year 82 Bcf was pulled and the five-year average is for 135 Bcf, according to EMD.

Industry consultant Genscape's preliminary forecast for Thursday's report is for a 242 Bcf withdrawal. "Withdrawals [reported] this [past] week were large at numerous fields as the abrupt and intense arrival of cold temperatures this week spurred record levels of December demand in many regions, and knocked nearly 1.7 Bcf/d of supply offline in the form of freeze-offs. While this week's report of an 81 Bcf withdrawal was regarded as bearish, next week's figure will lend support to bullish sentiments by pulling inventories well below year-ago levels," the firm said in a morning report to clients.

Analysts see ongoing cold and large storage withdrawals keeping a firm bid under the market. "[Friday] morning's modest selling doesn't look like a portent of a significant weakening in [Friday's] trade but instead appears to be in a consolidation phase with values restricted to [Thursday's] range into the weekend," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients.

"Whether values break out of this range on the up or down side will hinge to a large degree on adjusted temperature views that will begin to stretch out toward month's end. For now, most forecasts are favoring a large swath of polar air dipping down from Canada into the Midwest out to about Dec. 26. These views would appear to favor additional sizable supply deficit expansion through year's end, with this month's storage drain possibly making a run at 700 Bcf. The strong price advance of around 25% during the past five to six weeks will be difficult to reverse amidst this dynamic of deficit contraction and as a result, we are still advising against attempts to pick a top to this strong weather driven advance."

Genscape said recent cold has also diverted traditional flows from the Midwest east. "Appalachia imports from the Midwest are at all-time December lows and are nearing all-time lows for any point during the year. REX [Rockies Express] continues to bear the brunt of continued Marcellus growth. REX has been flowing 0.47 Bcf/d into Appalachia during the past 30-days, nearly 50% less than it flowed during the same time period in 2012. The declines serve as impetus for Tallgrass' [Energy Partners] efforts to reverse the pipeline to flow east-to-west."

Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile is looking for the market to test Thursday's value area at $4.394 to $4.336 before moving on and testing trend day "space-in-the-pipe" at $4.241 to $4.262. Consistent with his thinking that the market will work lower, at least in the near term, Saal noted "weakness/selling showing up in the back years. Cal '15, Cal '17 & Cal '19."

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