Natural gas for weekend and Monday delivery was little changed in Friday's trading in spite of a dangerous blizzard bearing down on large eastern population centers.
Very modest overall gains at eastern points were unable to offset much wider declines in the Midwest, Midcontinent and Gulf Coast. The NGI National Spot Gas Average fell 4 cents to $2.24, and average gains in the East were seen at 3 cents. Most points traded a few pennies to just over a nickel lower.
Futures trading was equally lackluster, with the spot February contract tracing out a modest 5-cent trading range. At the close, February had gained all of one-tenth of a cent to $2.139 and March was up two-tenths of a cent to $2.141. March crude oil continued its rebound adding $2.66 to $32.19/bbl.
Market points in the path of the weekend storm managed to add to gains made in Thursday's trading, but temperatures across the East and Midwest by the end of weather hostilities on Monday were expected to be at or above seasonal norms. AccuWeather.com forecast that the Friday high in New York City of 31 degrees would dip to 29 Saturday before rising to 37 on Monday, one degree below the seasonal norm. Cleveland, OH's 27 maximum on Friday was expected to inch up to 28 Saturday before surging to 40 on Monday, five degrees above normal. Chicago's Friday high of 31 was predicted to rise to 32 Saturday and reach 37 on Monday, 6 degrees above normal.
Gas on Transco Zone 5 gained 11 cents to $3.52, and deliveries into New York City on Transco Zone 6 gained 30 cents to $3.80. Farther south, gas on Transco non New York North, serving southern New Jersey, rose by 25 cents also to $3.66.
Points outside the crosshairs of the blizzard-like conditions eased on light volume. Deliveries to the Algonquin Citygate shed 12 cents to $4.74, and gas on Tennessee Zone 6 200 L dropped by 57 cents to $4.41.
Major market hubs were mixed. Gas at the Chicago Citygate fell 5 cents to $2.18, and gas at the Henry Hub rose 2 cents to $2.22. Deliveries to El Paso Permian fell 3 cents to $2.04, and parcels at the SoCal Citygate were quoted a penny higher at $2.43.
Natural gas demand may slacken somewhat early in the week as the winter storm passes through, but one section of the country is anticipated to see continued demand growth in spite of the warm December. "Cold weather brought responsive demand to SEMA [Southeast Mid-Atlantic] this week, charting the second and third highest demand levels of the winter," said industry consultant Genscape in a Friday report.
"Jan. 18 and 19 saw demand break 20 Bcf/d coming in at 20.29 and 20.15 Bcf/d, respectively. Both fell just short of the high water mark of 20.45 Bcf/d set on Nov. 18. While SEMA has yet to see any massive demand blowouts like the previous few years, this cold snap gives further proof that SEMA demand still has teeth, in spite of the mildest December on record, winter 2015/16 to date has seen 8.95% higher demand than the three average and 8.1% higher demand than last winter.
"Thus far, demand per degree levels are holding strong against levels seen last winter but are not displaying the same growth trend seen in summer 2015. Looking forward, temperatures are currently forecast to stay colder than average at 26.5 and 28.8 HDDs for Saturday and Sunday meaning demand should remain above average in spite of the weekend."
Analysts see the market on the downward side of the usage cycle and expect lower prices. "We are maintaining a bearish stance and would suggest holding any short March positions established [Thursday] within the $2.15-2.19 zone in anticipation of an eventual price decline to below the $2 mark," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients. "We are emphasizing the advanced stage of the heavy usage cycle in which the weather factor will gradually diminish. And with updated one- to two-week temperature views generally favoring a renewed mild trend across most of the continental U.S., some additional weakening would appear to lie ahead.
"We viewed yesterday's smaller than expected storage withdrawal as reinforcement to a bearish case. But apparently, the market was able to absorb this release with assistance from bullish spillover from the oil complex and some apparent short covering related to the upcoming blizzard that will soon be arriving into the eastern region. But any cold weather that might associate with a major snowstorm is likely to be short lived and followed by a significant northeast warm-up, especially within the eight-14 day time window that now stretches out to about Feb. 4th. All factors considered, lower values would appear to lie ahead, and we suggest maintaining any existing short March positions with stop protection advised above the $2.21 level close only."
The dangerous blizzard expected to pound the Mid-Atlantic Friday through Saturday will likely generate enough wind generation across the PJM footprint to offset purchases of natural gas for power generation. WSI Corp. in its Friday morning report said, "The storm will hold temperatures in the mid 20s and 30s, [and] fair and moderating conditions are expected to develop behind this system during Sunday into early Monday with highs in the mid 30s to mid 40s.
"However, a frontal system will slide across the power pool with rain and snow showers late Monday through Tuesday. It will be breezy and warmer ahead of this system with highs in the 30s and 40s. The major winter storm will help boost wind gen later [Friday] into midday Saturday, though mainly over the Mid Atlantic. Total output may peak at 3-4 GW. The second storm system will cause wind gen to ramp up during Sunday into early next week."