Cash prices on average skidded about another dime overall on Friday as surging prices at a couple of points in the Northeast couldn’t balance an overall weak tenor to an oversupplied market. Midwest points slipped less than a dime, but Gulf and eastern points suffered double digit losses. At the close of trading January futures had made it five straight losses in a row for the week and settled at $3.314, down 3.3 cents and February lost 3.1 cents to $3.358. January crude oil added 84 cents to $86.73.
Forecasts of a winter storm expected to slice through the Upper Midwest over the weekend and on into New England next week were ignored as prices continued lower and supply managers attempted to deal with too much gas and not enough demand.
“A really good day during the winter would be 300,000 Dt/d and we aren’t doing anywhere near that,” a midwest utility manager said. He noted that temperatures were 51 degrees, and “we are actually trying to sell gas and that is a bad situation that is only going to get worse.”
“We can’t even take gas out of storage, because we don’t need it. We have too much baseload gas and don’t need the storage gas. I am trying not to, but we have put baseload gas into storage for a few days. Today [Friday] is going to be a horrendous day. We are projecting only 98,000 Dt. and we’ll probably do 100,000, but we should be doing 140,000 to 150,000.
We are supposed to get some rain tonight and it is supposed to cool off a little next week. That should take us down into the 30s rather than the 40s and 50s we have been seeing this week. There is still nothing wintry out there,” he said.
Forecasters are saying the storm will grind through the Midwest and work its way east. “The storm system will bring a wintry mess to the Upper Midwest this weekend, impacting holiday shoppers and travelers throughout the region,” said Matt Alto, meteorologist with AccuWeather.com.
“Farther south, a period of rain will wet areas from Omaha, NE, Madison, WI., and Des Moines, IA, eastward into Chicago, Detroit and the Ohio Valley. A wintry mix will be likely in-between these two areas.”
By Sunday and Monday “the storm system will begin to weaken as it crosses the Great Lakes and heads toward the Northeast, and [s]now will spread into portions of southern Ontario, the St. Lawrence Valley and New England. Across the Upper Midwest, drier and colder air will filter in the wake of the storm system on Sunday. A few snow showers will linger for a time across the Upper Midwest as the system departs,” he said.
Weekend and Monday gas, nonetheless continued the trend lower for Midwest gas prices. Quotes on Alliance were a dime lower at $3.26 and at the Chicago Citygate weekend and Monday gas dropped 9 cents to $3.22. On Northern Natural Ventura deliveries were quoted at $3.16, six cents lower and at Demarcation parcels were seen changing hands at $3.14, down 7 cents. Deliveries on ANR SW fell 5 cents to $3.08.
At Gulf points double digit losses were the rule. On ANR SE weekend and Monday gas averaged $3.08 or 14 cents lower, Tennessee Gas Pipeline 500 L came in 11 cents lower at $3.16 and at the Henry Hub parcels were quoted at $3.15 also, down 12 cents. On Tetco E LA gas was quoted at $3.07, 13 cents off Thursday’s pace, Columbia Gas Mainline was $3.08, 13 cents lower, and on Transco Zone 3 weekend and Monday gas was $3.13, off 15 cents.
The Northeast continued its ever volatile trading with prices posting hefty gains as weekend temperatures were forecast to dip. Wunderground com predicted Boston’s high Friday of 50 would drop to 39 on Saturday, 39 on Sunday, before scooting up to 50 on Monday. Boston’s seasonal high is 42. New Haven, CT was forecast to see its Friday high of 51 drop to 43 on Saturday, 45 on Sunday, before reaching 48 on Monday. The normal high for New Haven this time of year is 41.
Gas at the Algonquin Citygate jumped 46 cents to $4.72 and deliveries to Iroquois Waddington came in 16 cents higher at $4.28. On Tennessee Zone 6 200 L weekend and Monday gas added 62 cents to $4.71.
Eastern points weren’t quite so fortunate as hefty double digit losses prevailed. Dominion averaged $3.06 or 17 cents lower and gas on Tetco M-3 shed 19 cents to $3.31. Gas bound for New York on Transco Zone 6 tumbled 31 cents to $3.36.
Futures traders note that although the current price downtrend has a strong seasonal analog to last year and the market might seem like a straightforward forecast, calling prices is never that easy since natural gas is one of the most volatile commodities after electricity.
According to Reuters “This year has been particularly arduous for investors. After making most of their money in the first quarter with a bearish bet on gas, three funds [Sandridge Capital, Sasco Energy Partners, and Velite Capital] spent the rest of the year trying to retain those gains with varying levels of success.
Their difficulties were prompted in the last two quarters by unexpected price swings caused by dynamic weather shifts in key U.S. consuming regions, which primarily drive demand for gas used in heating and cooling.”
Weather forecasts were largely unchanged from Thursday with mostly seasonal to above-normal temperature patterns expected in key energy markets. Forecasters are having a hard time identifying features that would enable cold Canadian air to move south.
Commodity Weather Group in its 11- to 15-day outlook shows above-normal temperatures defined by a triangular ridge from Minnesota to North Texas to Maine. Below-normal temperatures are confined to Montana and Idaho.
“While the models continue to show storm-induced temperature variability that complicates day-to-day forecast details, the upstream pattern situation over the North Pacific continues to be unfavorable for significant and prevailing cold weather over the Lower 48. The key trigger continues to be Alaska, where the models still do not build any new ridging to set up stronger southward cold air transport mechanisms,” said Matt Rogers, president of the firm.
“That may change in January pending pattern shifts triggered by the stratosphere and tropical forcing. But for the upcoming two weeks, the prevailing pattern argues to stay cautious on cold events (stronger South vs. North and highs vs. lows except for drought areas) and to be more aggressive on the warmer periods. This keeps the maps in the one-15 day period mostly on the seasonal to warm side overall.”
Top traders admit that what was once thought to be a weather- and power generation-driven reduction in the storage surplus has changed. “The bullish dynamic of a contraction in the supply surplus that we had cited through most of the fall period has simply been replaced by the dynamic of a renewed surplus expansion during the past three weeks,” said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients.
“As momentum has shifted, the charts have deteriorated and the large speculative entities have been enticed back into the short side. Until the temperature views shift enough to force a modicum of chart improvement, we expect fresh shorts established during the past couple of weeks to sit tight, especially given lack of support, until the $3.20 area that represents a double bottom in January futures established in late August and early September.”
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