The market finally had to acknowledge the fact that its large gains that dominated the first three trading days of the week lacked validating support from generally moderate weather fundamentals. Also feeling highly negative guidance from previous day’s futures loss of 27.6 cents, cash prices fell by double-digit amounts across the board Thursday.

Losses were spread fairly evenly across the various geographic market areas in ranging from about 15 cents to a little more than 55 cents.

The Energy Information Administration matched consensus expectations when it reported a 20 Bcf addition to storage during the week ending Nov. 13. The volume was essentially neutral when lined up with most prior estimates and on the bearish side in comparison with a 10 Bcf five-year average, but following an initial negative reaction, Nymex traders wound up pushing December natural gas 8.8 cents higher despite major weakness in the petroleum-based futures products (see related story).

Analysts at SunTrust Robinson Humphrey/the Gerdes Group noted that moderate weather has begun taking its toll on the market, “with above-normal temperatures (and a weak underlying market balance) raising the possibility of building [storage] through November.” That has not happened since 2001, they said.

Modest warming trends are getting under way in several regions such as the Midwest, Northeast, Southeast, Rockies and Western Canada, leaving behind only a few locations where forecast lows for Friday will still be in the 20s. Most other sections of the U.S. and Canada will bottom out in the 30s, 40s and 50s.

The south-central states of Texas and Oklahoma, along with parts of the Pacific Northwest, are among the few areas where dropping temperatures will go against the overall weather grain. The Dallas-Fort Worth metro area will see Thursday’s low in the mid 50s drop about 10 degrees Friday, while Oklahoma City can expect Thursday’s high around 67 to experience a similar decline.

PG&E made the conditions less stringent in extending a systemwide high-inventory through Friday (see Transportation Notes). Despite the extra lenience, Malin and the PG&E citygate plunged 35-40 cents or so Thursday after having seen only moderate losses in Wednesday’s trading after the OFO was first announced.

“I just don’t get it,” a Gulf Coast trader said referring to both the major cash gains through Wednesday this week or prompt-month futures rising Thursday despite what she considered a modestly bearish storage report. The cash market was getting a correction Thursday, she said, but about the only thing she could suggest in trying to explain the futures action was that Nymex traders must have been looking down the road at lower Northeast temperatures predicted for the last few days of the month. Lows should stay a few degrees above freezing over the long Thanksgiving weekend, she added, but the region will be quite a bit colder than it is now.

The trader reported “just getting started” on December business Thursday, but not actually making any deals yet, and seeing “very little getting done” so far on the IntercontinentalExchange online platform. Louisiana pipes are looking like they will trade around index flat to index plus 0.5 cent, she said.

A Midcontinent producer was similarly puzzled about the early-week cash price strength, saying he didn’t “know what traders could have been thinking” in driving prices so high. They didn’t have the weather-based demand to back up such spikes, he said, adding that he thought the market had been driven more by emotion than facts.

He did not expect Thursday’s modest futures uptick to be able to turn cash quotes higher again Friday.

He reported seeing Panhandle Eastern basis being offered at minus 9 cents for December baseload, which contrasts greatly with the pipeline’s year-ago basis of about minus $2. He expects some marketers to get hurt as a result because such tight basis makes it hard to make transportation costs to the market area work, he said. “Somebody is either making a lot of money or taking a big hit” from the big contraction in basis, he speculated.

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