Physical natural gas for Thursday delivery moved within a few pennies of unchanged at most points in Wednesday's trading. Points in the Midwest, Midcontinent and Rockies were down from a couple of pennies to about a nickel, while the rest of the country was flat to higher, by approximately the same count.
Futures prices limped lower ahead of Thursday's inventory report with June giving up 5.9 cents to $4.740 and July easing 6.4 cents to $4.754. June crude oil added $1.27 to $100.77/bbl.
Next-day prices in the Midwest shed about a nickel, and while temperatures were expected to jump Thursday, by Friday highs were seen at normal levels. Wunderground.com reported that the high of 66 in Minneapolis Wednesday was anticipated to jump to 79 Thursday before sliding back down to 60 on Friday. The seasonal high this time of year is 64. Chicago's Wednesday high of 74 was seen making it to 84 on Thursday and then retreating to 70 on Friday; the high this time of year is 67. Indianapolis' Wednesday maximum of 84 was forecast to reach 86 before slip sliding to 71 on Friday. The normal high in Indianapolis is 70.
Active weather is expected throughout the region. The National Weather Service in Indianapolis reported that a "strong upper ridge over the eastern U.S." would "provide a breezy and even warmer day on Thursday. Low pressure over the Central Plains will move into the western Great Lakes by Thursday night. A trailing cold front will move across our region Friday and then stall across the Ohio Valley Saturday.
"In the longterm, a warm front will move north across our region early next week as another area of low pressure moves from the Central Plains into the upper Midwest. Models indicate the cold front will sweep through our region Tuesday. However an upper low over southern Canada will provide cooler temperatures and a slight chance of showers around the middle of next week."
A Midwest utility buyer said the company would not be doing any injecting until June. "May is a dead month for Northern Natural without any withdrawals or injections and they are at overrun rates and subject to allocations so we tend to not inject or withdraw much this month."
The industry-wide experience of lean storage did not occur for the utility in spite of brutal cold spells. "We are rolling over more gas from last season than we would like. We would have liked to have withdrawn more gas this winter," he said. We were constrained by allocations and couldn't get it out without risking a penalty."
Gas for Thursday delivery at Joliet slumped 4 cents to $4.76, and gas on Alliance was off 4 cents to $4.77. Deliveries to the Chicago Citygates were off by 3 cents to $4.78, while packages on Northern Natural Ventura changed hands 6 cents lower at $4.64.
At Gulf points, prices were largely unchanged. Deliveries to Transco Zone 3 were up 2 cents to $4.77 and gas at the Henry Hub came in 4 cents higher at $4.83. Deliveries to Columbia Gulf Mainline rose 2 cents to $4.70 and on Tennessee 500 L next-day gas was seen at $4.74, unchanged. Parcels on ANR SE were also flat at $4.70.
Rockies next-day gas was down a couple of pennies. At the Cheyenne Hub, Thursday gas fell 3 cents to $4.55 and at Opal prices added a penny to $4.61. The Opal gas processing plant is now back up to capacity of about 1.1 Bcf/d following a fire and explosion two weeks ago. On CIG, mainline next-day gas was seen at $4.52, down 2 cents and on Transwestern San Juan Thursday gas fell a penny to $4.63.
Futures traders were looking ahead to Thursday's storage report by the Department of Energy's (DOE) Energy Information Administration (EIA). "We'll see what the number brings, but we are hearing a build of 75 to 80 Bcf," said a New York floor trader. I think if we got a number in the high 60 Bcf range, it would rally prices above $4.80."
Last year 81 Bcf was injected and the five-year pace stands at 72 Bcf. IAF Advisors calculates a build of 71 Bcf, and the folks at Citi Futures Perspective are expecting an increase of 62 Bcf. A Reuters poll of 24 traders and analysts revealed a 71 Bcf sample mean with a range of 61 Bcf to 79 Bcf.
Tim Evans of Citi Futures Perspective saw Tuesday's 11-cent advance as "drawing support from a temperature forecast broadly characterized as limiting the rate of storage injections as well as prospects for Thursday's DOE report." Evans cites expectations of a storage build in the 71 Bcf range, "a supportive figure compared with the larger 82 Bcf build in the prior week. Our model points to the possibility of an even lower 62 Bcf refill, which we read as the potential for a bullish surprise," he said.
"However, the difficulty with banking on either the weather outlook or Thursday's DOE storage report as price supports is that the larger pattern continues to feature above-average storage injections and a declining year-on-five-year storage deficit in the weeks ahead." Evans forecasts that the year-on-five-year deficit will decline to 948 Bcf by May 23, down form its present 984 Bcf shortfall.
Tradition Energy's Eugene McGillian sees market concerns of insufficient storage refill countered by "expectations of record production levels of gas and the next couple weeks of slack demand shoulder season weather" would provide "resistance to rising gas prices until the onset of this summer's cooling season. Weather forecasts are expected to fluctuate in the coming weeks with above-normal temperatures expected across the East in the next five-days followed by a shift to cooler to normal temps in the second half of this month," he said.
Weather forecasters see the West cooling and the Southeast trending warmer. WSI Corp. in its Wednesday morning 11-15 day outlook said the period "has trended cooler over the West and warmer over the southeastern two-thirds when compared to the previous forecast. Forecast confidence is considered near average standards as models show fair large-scale agreement."
WSI sees risk "to the warmer side over portions of the Plains, Midwest and East if a sweeping cold trough is weaker than anticipated. Slight warmer risks are in place over the desert Southwest in through the Southern Plains late in the period under a progressive heat ridge."
According to the firm's figures, early next week shows Philadelphia's high at 84, well above its 73 norm, and Chicago is expected to see a high of 67, just below its 69 seasonal high.