Physical gas for Wednesday delivery plunged in Tuesday's trading despite continued brutal cold across the Midwest as far east as the Mid-Atlantic.
Gulf points enjoyed nominal gains, but California, the Rockies, Midcontinent and Midwest all saw dollar-plus losses as traders attributed the selling to bidweek overbuying and subsequent liquidation. There was no liquidation in futures trading. April gained 17.5 cents to $4.667 and May rose 12.8 cents to $4.583. April crude oil fell $1.59 to $103.33/bbl as international tensions eased.
In California, as elsewhere, prices declined more than $1 as traders thought nobody wanted to be caught short of gas and made greater bidweek purchases than necessary. "I thought the big end-users overbought. They didn't want to get caught [short] and others in the trading community overbought as well," said a southern California gas buyer.
"Everyone seems to have extra gas on hand, and the market came off. It has been puzzling. Some days you think the market would be strong and it comes off and days it should be falling it runs up. It has been somewhat baffling. I think it is people just clearing out positions. The market did come off later in the day relative to where it opened."
Gas for delivery Wednesday into Malin shed $1.26 to $6.88, and gas headed to PG&E Citygates fell $1.15 to $6.93. At SoCal Citygates, gas for Wednesday delivery was quoted at $7.07, off by $1.70, and at SoCal Border next-day gas changed hands at $7.02, down $1.71. On El Paso S Mainline gas was seen at $7.21, down $1.47.
Elsewhere the puzzle of lower physical gas prices along with record low temperatures was in full swing. Wunderground.com meteorologists Chris Dolce and Nick Wiltgen said, "A streak of record-breaking cold temperatures across much of the U.S. continued Tuesday with unprecedented March chill in parts of the Northeast, bringing the total number of states experiencing unprecedented March chill to at least 16.
"In Baltimore, the low temperature Tuesday morning dipped to 4 degrees, breaking the all-time coldest March low temperature on record -- previously 5 degrees on March 4, 1873. Atlantic City, NJ, broke its record coldest March low temperature late Monday night, dipping to a shivering 2 degrees. The actual location of this record is at the Atlantic City International Airport, which is located just inland from Atlantic City in Pomona, NJ.
"Dulles International Airport, just west of Washington, DC, reached 1 degree below zero Tuesday morning, tying the all-time March low previously set after the Superstorm on March 15, 1993. However, weather records at Dulles have a relatively short history, only dating back to 1962. In Charlottesville, VA, the low temperature bottomed out at 1 degree above zero Tuesday morning, shattering the city's all-time March record low of 7 degrees."
Eastern points suffered double-digit dollar losses in some cases. Wednesday deliveries to Transco Leidy fell 33 cents to $3.64, but gas delivered into Tetco M-3 Delivery dropped $11.24 to $8.56. Gas headed for New York City on Transco Zone 6 tumbled $10.52 to $12.26 and non New York gas on Transco Zone 6 fell $13.50 to $8.42.
Wunderground.com forecast below normal temperatures across a broad swath of the Midwest and upper Great Lakes, yet the selling continued. The forecaster predicted Tuesday's high in Chicago of 32 would drop to 23 Wednesday before making it back up to 28 Thursday. The seasonal high in Chicago this time of year is 42. Cleveland's 26 high on Tuesday was anticipated to slide to 24 Wednesday and reach 34 on Thursday. The normal early-march high in Cleveland is 38. Toronto's 19 high on Tuesday was forecast to reach 23 on Wednesday and hold for Thursday. The normal high in Toronto is 33.
Gas for Wednesday delivery on Alliance fell $25.74 to $14.22, and at Chicago Citygates Wednesday packages were seen at $10.25, down $14.36. On Consumers next-day deliveries tumbled $20.39 to $16.04 and on Michcon gas came in at $15.24, down $22.56. Dawn gas fell a stout $14.24 to $21.03.
Futures traders see a duel between seasonal forces anticipating an end to the large storage deficit and weather bulls looking for continued thin supplies and large storage withdrawals. "We are maintaining a bullish short term posture for now in quest of an advance to the $5 mark while also conceding that such a development this week will require a major bullish miss of at least 10-12 Bcf from average industry expectations [140 Bcf range] for Thursday's EIA," said one Midwestern trader.
Jim Ritterbusch of Ritterbusch and Associates said "While we had expected some reduction in price volatility with the rollover into the April futures contract, such doesn't appear to be the case given [Monday's] 26-cent trading range with the market swinging on both sides of Friday's close by an equivalent margin.
"We saw no major impetus behind [Monday's] 25-cent selloff from the early highs other than some talk of temperature moderation later next week that could extend into the third week of March. For now, we feel that price declines will be slowed, not only by the current exceptional cold spell within the upper Midcontinent that saw temps 15 degrees below zero overnight in northern Illinois, but also by a couple of larger than normal supply draws that appear poised to push supply levels well south of the 1 Tcf level by month's end when storage usually bottoms.
"While conceding to the usual seasonal decline in heating degree days (HDD) during the month of March, we also feel that this seasonal trend has been appropriately discounted and that the market will still need to see occasional price spikes to above the $5 mark in order to attract supply to market during the upcoming spring/summer periods via either increased drilling or a further trend in favor of gas to coal displacement."
WeatherBELL Analytics in its Tuesday morning 20-day forecast sees heating requirements 20% higher than normal extending out two weeks. For the six- to 10-day period, it forecasts nationally an accumulation of 134.2 HDD, well above last year's 92.9 and a 30-year average of 98.6. In the 11- to 15-day it predicts 106.5 HDD, much higher than 2013's 92.4 HDD and also above the long-term average of 88 HDD.
Meteorologist Joe Bastardi said the March 1-7 period "will likely break the natgas draw record. The warmup for a few days this weekend will be reversed again next week, perhaps with a major winter storm near or north of last one. In days 10-20, the trough regains control over the East along with a Western ridge (likely beyond), [and] March [is] likely to be coldest since at least 1996 from the Plains eastward.
"Confidence is a little lower in the six-10 day because of some prior warming that may try to move up ahead of a major winter storm, but the threat of extreme cold exists in areas where snow is laid down. The current cold is remarkable as it comes with thunder/ice in Houston this morning, and some all-time record lows for March in some of the 'secondary cities' with the fresh new snowcover (e.g., Atlantic City). It's also below zero in the suburbs of [Washington, DC] [Tuesday] morning. Truly remarkable. It is likely this will be the coldest week since natgas draw records began."