Overall next-day physical prices added about a penny on average Wednesday for Thursday trading as temperature outlooks gravitated toward “normal.” For the most part, prices fluctuated within a dime in either direction, with most points adding or losing a few pennies. Gulf Coast, Rockies, Midcontinent and Northeast points inched higher, while Midwest and California spots dipped into the red.
At the close of futures trading, May had risen 8.8 cents to $4.364 and June was up 8.7 cents to $4.396. May crude oil eased 12 cents to $99.62/bbl.
Although the country's midsection was expected to see some active weather, the impact on temperatures was unable to keep readings far from seasonal norms. AccuWeather.com reported that the high in Milwaukee, WI Wednesday of 38 degrees would increase to 39 Thursday and 43 Friday. The normal high is 49. Chicago's Wednesday high of 40 was seen inching up to 41 Thursday and making it to 52 on Friday. The normal high in the Windy City is 54. Farther south in Indianapolis, the high Wednesday of 59 was anticipated to reach 67 by Thursday before sliding to 64 on Friday. The normal high is 58.
"A powerful spring storm is to spin up across the nation's Heartland the next two days with impacts ranging from heavy, occasionally thundery downpours in several waves here in Chicago, severe weather downstate and the second snowstorm in a week to Chicago's north,” said Chicago Weather Center’s Tom Skilling.
From Wednesday into Friday, the weather pattern could “produce Chicago's heaviest rain tally in fife months, generate a potentially serious severe weather outbreak downstate and over the southern and central Midwest and is likely to lambaste the North Woods region of the upper Midwest with a major snowstorm."
Quotes at Joliet for Thursday delivery added 3 cents to $4.76, and Alliance next-day gas came in at $4.77, up 3 cents. At the Chicago Citygates Thursday packages were seen at $4.70, up 3 cents. However, most other midwestern points came off.
Deliveries to Northern Natural Ventura added 3 cents to $4.71, and Demarcation next-day gas changed hands at $4.69, up a penny. Gas on ANR SW rose 9 cents to $4.38.
A Nebraska buyer said the weather had been a little cool, and "we're still seeing some pretty good loads, about 120,000 to 130,000 Dth, but it’s supposed to warm up later in the week so we should see that drop off. We seem to have sporadic nice days that don't seem to last more than a day or two."
Storage-wise, the buyer said the Nebraska firm had about 20% of its gas left, and "that should get us through the end of the month. May is a dead month; we are not supposed to be doing anything on Northern. As of this weekend our LNG [liquefied natural gas] plant will not be able to help us, as it will be switched over to liquefaction mode and [won’t] be available for peak-shaving.
"We never took out of storage more than our firm withdrawal rate was so we didn't get into really bad shape by taking too much out too soon."
West Coast prices slipped a few pennies as temperatures in the San Francisco Bay Area were seen holding steady. According to AccuWeather.com's Michael Kuhne, "April began on a rainy note in the Bay Area as another storm system pushed much needed showers into the region, [but] the beneficial rain will not stay as showers and thunderstorms subside. Temperatures will remain steady in the high 50s and low 60s into the weekend…
“As Thursday approaches, it will remain dry with temperatures in the low 60s and intervals of clouds and sun. A chance for rain showers will briefly return on Friday, but will subside into the weekend. Overnight lows will remain in the high 40s into the weekend."
Gas for Thursday delivery at Malin fell a penny to $4.45, and deliveries to the PG&E Citygates fell 3 cents to $4.95. At the SoCal Citygates, next-day quotes were seen at $4.71, up a penny and at the SoCal Border ,Thursday parcels fell 2 cents to $4.52. Gas on El Paso S Mainline shed 3 cents to $4.52.
Futures traders saw the day's advance as a reflection of the expected stout withdrawal in Thursday's storage report. "I think traders are positioning themselves ahead of the inventory report. Also we are right in the middle of $4.20 support and $4.50 resistance," said a New York floor trader. "For the most part it was a quiet day."
He noted a large block trade of 1,000 contracts in both the October 2014 and December 2014 period. The trader suggested that it was a spread trade buying the December and selling the October, but it was not indicated on the Clearport system.
He added that the consensus expectation was for a withdrawal of 74 Bcf in the Energy Information Administration’s inventory report, well ahead of the five-year average of 8 Bcf but less than last year's hefty 95 Bcf pull. IAF Advisors of Houston expects a withdrawal of 81 Bcf, and Ritterbusch and Associates calculates a pull of 80 Bcf. A Reuters survey of 24 traders and analysts revealed an average 74 Bcf with a range from 61 Bcf to 82 Bcf.
Overnight forecasts warmed. WSI Corp. said in its six-to-10 day outlook that Wednesday’s forecast had “trended warmer over the lower Midwest and south late in the period. Forecast confidence is only about average, thanks to the highly changeable, energetic pattern.
"The trend over the past 24 hours has been to lift out the eastern trough faster and allow for a southwest flow to develop rapidly late next week. If the ECMWF [European model] is correct, temps will end up even warmer than the already revised forecast for the East Coast on Friday."
Risk managers see those with exposure to lower prices at greatest risk. "Cool temperatures in the Midwest and Northeast continue to give the natural gas market some support, but as we wrap up the heat season, the below-average temperatures become less significant," said Mike DeVooght, president of DEVO Capital. "The weekly storage numbers helped to rally the market when the draw came in greater than expected, [but] on a trading basis, we will hold short positions and look for the market to continue to work back toward the $4.00 level."
DeVooght advised trading accounts to hold a short May futures position rolled from April ($5.00-5.10) and end-users should stand aside. Producers were counseled to hold a short May-October strip at $4.20-4.30 ,as well as a short second summer strip at $4.50.
According to Tim Evans of Citi Futures Perspective, Tuesday's decline was prompted by "some likely long liquidation from what have been substantial managed money exposures...The decline occurred despite what we continue to see as a supportive fundamental backdrop." He added that Thursday's gas storage report is expected to show a "robust net withdrawal similar to our model's 74 Bcf estimate, a stop up from the prior week's 57 Bcf decline and much more than the 8 Bcf five-year average draw."