That is likely to offer trading opportunities. "That [report] would be a short term rally, and look for the market to be a little overbought," said a New York floor trader. "I think traders will rally the market all next week, and then they will take it down."
Analysts see the Wednesday-Thursday price decline as an opportunity to step up and take a long position going into the latter half of the heating season. "With the winter-to-date gains unwound and yet still more than half of the heating season ahead, we are growing more positive on gas prices," said Teri Viswanath, Commodities Strategist with BNP Paribas. "A very cold start to the season has boosted heating demand, rapidly depleting inventories to levels that suggest that the prolonged slackness in the balances has been eliminated. The consequent sizeable y/y storage deficit implies a significantly reduced baseline from which working gas in storage would seasonally build next summer."
She recommends "early positioning on the next injection season in the wake of this week's sell-off. Buy out-of-the-money calls on Oct '14 and/or sell puts on Q2 '14. [T]he current price dip presents an opportunity to initiate trading positions based on more constructive fundamentals ahead," she said in a morning note to clients.
Others aren't so sure of a long position. "We feel that the highs for this year were likely placed late last month at the $4.58 area and that this week's chart damage will likely be restricting upside price progress from here to about the $4.20 area unless a major and unusual cold event is seen again," said Jim Ritterbusch of Ritterbusch and Associates. "However, such a development appears unlikely as this winter period proceeds and days become longer. We will further emphasize that the dynamic of supply deficit expansion that drove the November-December 25% price advance is likely to be stabilized following next Thursday's storage outlier."
A Rocky Mountain observer Friday thought the market reaction Wednesday and Thursday was overdone to the downside. "I don't care what the weather is like next week as long as it doesn't stick around. I think we are due for a 'pop' higher," said a Denver producer.
"I think the market got a little ahead of itself and the milder weather, a rebalancing by index funds, and the fact that commodity funds are now the most bullish they have been since about 2007 was enough to correct the market. Also, weather forecasts are due to turn cooler."
Joe Bastardi of WeatherBELL Analytics is looking for cold about the end of the week. "Source regions are crucial over the coming 20-30 days. The 'relaxation' of the major eastern trough is short-lived, as a major buckling evolves with successive stronger troughs digging into the eastern U.S. in the coming eight days, culminating in a power trough over the East by next weekend," he said in a morning report to clients. "The Dam across Alaska now prevents true Siberian air from getting into these troughs, so the air masses are Pacific in origin through the middle of next week, then due to have some arctic air in them."
For the moment, though, weekend and Monday prices throughout the Rockies took it on the chin. Gas delivered to CIG Mainline dropped 17 cents to $3.93, and gas at the Cheyenne Hub fell 16 cents as well to $3.97. Deliveries to Opal shed 14 cents to $3.97, and on Northwest Pipeline Wyoming weekend and Monday gas was seen at $3.94 down 15 cents. Gas at El Paso non-Bondad dropped 16 cents to $3.89.
New England points led the parade lower as forecast temperatures by Monday were expected to reach 14 degrees above normal. Wunderground.com forecast that Boston's Friday high of 36 was expected to rise to 56 Saturday and reach 49 by Monday. The normal high in Boston this time of year is 36. Hartford, CT's Friday peak of 36 was seen rising to 54 Saturday and slide to 48 by Monday, still 14 degrees above normal. The high Friday in Providence, RI also of 36 was predicted to jump to 57 Saturday before dropping to 44 Monday. The normal high in Providence in early January is 37.
The National Weather Service in southeast Massachusetts said, "light rain and snow showers...along with a few pocket of light freezing drizzle...will push offshore during this afternoon [Friday]. Overnight drizzle...changing to rain is expected as temperatures rise. Locally heavy rainfall and strong winds expected late Saturday into Saturday evening. Low pressure racing across Canada will swing a cold front across New England on Tuesday, [and] Low pressure crossing the Midwest will bring another chance of rain or snow midweek."
Weekend and Monday packages at the Algonquin Citygates plunged $4.376 to $4.64, and gas upstream at Iroquois Waddington fell 65 cents to $4.59. On Tennessee Zone 6 200 L gas dropped $4.60 to $4.71.
Although short-term prices have plummeted, more deferred pricing has held up reasonably well. A Houston pipeline analyst said, "It's a little warm and gas on Algonquin at about $4.50 is pretty low. Balance of the month on Algonquin is going for $15," he said.
Other points in the East also fell. Deliveries to Transco-Leidy retreated 84 cents to $2.45, and on Dominion weekend and Monday gas was seen at $3.29, down 14 cents. At Tetco M-3 Delivery gas changed hands at $3.78, down 27 cents, and on Transco Zone 6 New York gas came in at $3.93, down 33 cents.
Weather forecasters call for some incoming cold, though nowhere near as severe as the juggernaut that marched through the Midwest and East earlier this week. In its six-to 10-day outlook, Commodity Weather Group shows a below-normal temperature ridge extending from South Carolina north to Illinois and bounded on the East by Virginia and the West by Mississippi. New England is seen above normal, and the Mountain West is forecast to be under a ridge of above-normal temperatures extending from Montana to the desert Southwest including California.
"Plenty of detail challenges exist next week as a storm and then a transient cold push engage eastern North America. There are still colder risks around the storm system mainly due to dynamic cooling effects behind it for the Midwest and South toward middle next week, while a transient cold push late week could be a bit stronger," said Matt Rogers, president of the firm.
"The models agree that the cold push is shorter-lived, with warmer weather returning faster in the second half of the holiday weekend. The 11-15 day continues to be a massive challenge. The American models still favor a much warmer pattern, while the European ensembles edged slightly warmer today, but rebuild the Alaskan ridge by days 14-15 (which would lead to colder 11-15 day changes by this Sunday and Monday's updates). We leaned more toward the Euro."