With heating load fading again after a weekend surge that was relatively light outside the Northeast, prices dropped by double-digit amounts at all points Monday. The softness was exacerbated by the previous Friday’s 34.6-cent decline by expiring March futures. And the double whammy of milder weather and a half-dollar-plus dive Monday by the screen in the April contract’s prompt-month debut should serve to keep first-of-March daily prices on the run Tuesday.
Monday’s price dips ranged from just over a dime to nearly 80 cents. Northeast citygates, which had recorded dollar-plus spikes going into the weekend, tended to see the biggest drops Monday, but otherwise declines were fairly evenly dispersed among geographic market areas.
MRT was symptomatic of the changing weather trends. Little more than a week after issuing a System Protection Warning (SPW) due to cold temperatures in its service area (see Daily GPI, Feb. 17), the pipeline said a new SPW will go into effect Tuesday — but this time due to “extremely warm weather” (see Transportation Notes).
The West can expect heavy snow in its northerly mountain areas Tuesday, with the icy precipitation moving south into the Colorado Rockies late in the day, but the gas price impact is likely to be negligible since most of the affected areas are lightly populated. The Northeast will have to wait until later in the week before shedding its frigid conditions, but the temperature trend will be modestly higher Tuesday.
Meanwhile, outside of cold and occasionally snowy weather in the Upper Plains and Upper Midwest, the north-central U.S. will be relatively moderate for the end of February, and much of the South will experience temperatures more closely resembling mid-spring than late winter.
The Northeast has a little bit more cold to get through before seeing a significant warm-up, said a producer who trades the region, but the worst weather occurred over the weekend. Despite Monday’s weakness in daily prices they were strong enough to cover transport from the production area, and the producer considered them relatively robust in comparison to the Nymex plunge.
The combination of milder weather tendencies, continuing futures softness (Monday’s trading ended in a nine-month low for a prompt-month contract) and growing pressure to use storage supplies should result in a big dip in first-of-March spot prices Tuesday, the producer continued. Cash rallies should be difficult to attain, he said, as the current market can’t compare to last year’s “brutal” last half of January, especially because storage levels weren’t as abundant then as they are now. He expects to see a rush of storage withdrawals flooding the market by the middle of March.
The producer said his company wrapped up all its March business Friday, but he was sure it would have seen lower bidweek prices Monday if it had anything left to sell.
A trader who markets gas on behalf of several independent Gulf Coast producers said it’s easy to see why prices are going lower now; what was difficult to understand was why they stayed so high late last year in the face of so much fundamental bearishness. Quotes for Southern Natural Gas were at a premium to the screen pretty much all through late 2005 when hurricane-related outages sharply dented the pipeline’s supply sources, but now that it has returned to throughput levels like those before Hurricane Katrina hit, it’s being reflected in weaker Southern pricing, she said.
The producer said it was kind of a struggle placing gas on a couple of Gulf Coast pipes during the March bidweek. For example, TGT Zone 1 was a problem because of her producer clients having to compete with abundant storage gas connected to TGT that must be cycled out of facilities during March.
NOVA had its linepack drafted over the weekend, so it changed its imbalance tolerance range Monday to encourage packing, but a warm-up was under way in Alberta, said a Calgary-based producer. He noted that the Calgary area was low as about minus 13 degrees C (just below zero F). early Monday morning but up to plus 9 degrees C (about 38 F) that afternoon. He reported a spread of about C45 cents from Westcoast Station 2 to the Aeco C Hub in Alberta, “so we’re sending as much as we can east rather than south to Sumas.” However, Sumas numbers were still able to cover transport costs on Westcoast’s T-South system, he said.
Other than “a lot of ups and downs” in prices, the producer considered it a fairly routine bidweek. “Every time you thought you had a good price for your gas,” substantial screen movement would complicate things, he said.
Even with gas prices getting more attractive again in March, an industrial end-user said his company hadn’t made any plans at this point to reactivate facilities that were idled when prices were still very high last year. Noting that it was his personal opinion, the buyer said he felt that heavy gas-consuming industries could make money again at current prices, but if everybody restarted all their inactive plants again, the resultant rush of demand likely would send prices back up. One ammonia producer was restarting its plant to provide fertilzier for spring planting because of lower prices (see separate story).
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