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Broad Weakness Outdoes New England Strength; Futures Ease Higher

Physical gas for Friday delivery slipped a few cents Thursday as outsized gains at New England points could not offset broader losses in the Midwest, Gulf Coast and California.

Weather forecasts show no warming in sight, and futures prices inched higher on light volume ahead of what is expected to be a government report Friday showing another above-normal withdrawal from inventories. At the close January had risen 1.7 cents to $4.433 and February had gained 0.7 cents to $4.476. February crude oil rose 33 cents to $99.55/bbl.

Prices rose at New England and eastern points as energy demand continued high and forecast temperatures showed no signs of backing down. AccuWeather.com forecast that Boston's high of 38 Thursday would fall to 36 Friday before reaching 44 on Saturday. The normal high in Boston for late December is 38.

Farther south, temperatures were also forecast to hold at seasonal norms Friday. AccuWeather.com predicted the high in New York Thursday of 37 would rise to 40 before jumping to 49 on Friday. The normal high in New York City is 40. Philadelphia's 40 high on Thursday was seen rising to 42 Friday and up to 49 on Saturday. The seasonal high in Philadelphia is 42.

The National Weather Service in New York City said "high pressure continues to nose in from the southwest through Friday night. A weak trough moves through in the afternoon with winds backing more to the west...and then southwest in the evening ahead of low pressure passing north of the Great Lakes. Skies will be mostly clear during this time with perhaps a brief period of clouds Friday afternoon in association with the aforementioned trough. High will top out in the middle 30s to around 40...with lows generally in the 20s. These values are close to seasonable."

Power demand continues to be high. The New England ISO forecast that Thursday's peak load of 18,500 MW would decline Friday only nominally to 18,410 MW Friday before easing to 17,100 MW on Saturday.

Quotes at the Algonquin Citygates rose $1.40 to $8.99, and gas for Friday delivery to Iroquois Waddington fell 12 cents to $5.20. Gas on Tennessee Zone 6 200 L rose 93 cents to $9.33.

Deliveries Friday on Transco-Leidy added 31 cents to $3.34, and gas on Dominion was flat at $3.57. Gas was seen on Tetco M-3 Delivery at $4.37, up a penny, yet gas headed for New York City on Transco Zone 6 fell 9 cents to $4.56.

Prices across the Midwest slipped as a brief warmup was forecast. Tom Skilling, a meteorologist at the Chicago Weather Center, said on his Facebook page that although Chicago had its coldest Christmas Eve in nine years and 1.2 inches of snow at O'Hare for the first white Christmas in three years, "a windy warm-up is to sweep in this Saturday. But bitterly cold air looms in several surges next week as we say good-bye to 2013 and welcome in the New Year!"

Bill Snyder of the WGN Weather Team reported on Twitter that "December 2013 [is] now running nearly 6 degrees below the long-term average and ranks 22nd coldest of past 144 yrs, among chilliest 15% since 1870."

Gas for delivery Friday on Alliance fell 14 cents to $4.68, and at the Chicago Citygates gas was quoted at $4.69, down 15 cents. On Michcon, gas came in at $4.68, down 6 cents, and on Consumers Friday deliveries were seen at $4.69 as well, off by 7 cents. At Dawn, Friday packages changed hands at $4.87, down 6 cents.

Cold weather notwithstanding, a Michigan marketer said that he made some spot purchases of gas for customers, but "basically we didn't pull any gas out of storage for December."

Weather models haven't changed much and still show dominant cold. "Over the holiday period, the modeling continued to project a cold pattern situation over the next two weeks for much of the Central, Eastern and Southern U.S., but the challenges offered by detail differences continued to be immense," said Matt Rogers, president of Commodity Weather Group.

"Our outlook is a bit warmer on the whole [Thursday], especially due to some warmer short-range changes ahead of the late weekend cold front; but the prevailing pattern is still colder than normal and both the six-10 and 11-15 day periods carry colder risks due to some very aggressive American model runs. The various models are definitely struggling with pattern details. The European ensemble, for example, is nearly torn in half between dropping the next surge of cold air into the West and Central first and going more directly to the Central and East first."

Analysts are looking for a stout pull from storage when Friday's figures are rolled out, although not close to the record 285 Bcf of last week. "Although the DOE storage report for the week ended Dec. 20, due out at 10:30 a.m. EST on Friday, won't have the same kind of blockbuster impact that the record 285 Bcf net withdrawal for the prior week did, our model projects a robust 177 Bcf drop that will look supportive compared with both the date-adjusted 73 Bcf draw from a year ago and the 125 Bcf five-year average decline," said Tim Evans of Citi Futures Perspective. "We've not seen that many competing estimates, but the ones we have surveyed are in the vicinity of our own," he said in closing comments Tuesday.

Bentek Energy's flow model predicts a pull of 175 Bcf, and a Dow Jones survey revealed an average 178 Bcf.

Evans' figures show an increasing year-on-five-year deficit out to the middle of January reaching 478 Bcf by Jan. 10. He recommends holding on to a long February futures position from $4.467 that was rolled on Dec. 20 with a protective stop at $4.34.

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