Physical natural gas traders for weekend through Tuesday delivery saw no immediate need to commit to four-day deals and prices oscillated a few pennies on either side of unchanged.
Gains in Texas and Louisiana were overshadowed by losses in the Midwest, Midcontinent, Rockies and California, and even the Northeast failed to exhibit its usual volatility. The NGI National Spot Gas Average fell a penny to $3.33. Futures trading was less volatile as well. Traders see February futures needing to breach the mid $3.50s to maintain upward momentum. At the close February had gained 3.3 cents to $3.419 and March was up 2.9 cents to $3.396. February crude oil fell 64 cents to $52.37/bbl.
Short-term traders are partial to the long side. "The storage report came in a little bullish and you've got some cold weather coming in, and I like the market short term up to $3.50 to $3.52. It's got to rally through $3.52 to keep going," a New York floor trader told NGI.
Market technicians, on the other hand, see market risk to the downside. "The risk to this market is that the market stays far enough from the highs to satisfy the bulls long enough to wear out their patience levels," said Walter Zimmermann, vice president at United ICAP.
"I'm just a little nervous here. The bulls are all thinking 'all I need is patience and winter will bail me out.' My suggestion to them is the market may require more patience of them than they think they are going to need.
"You would think the decline from $3.99 to $3.10 would have been a little traumatizing to the bulls, but they have barely budged at all. The Bloomberg survey shows the natural gas people are still heavily committed to the long side and the sentiment has backed off a little bit but nothing dramatic. The apparent stubbornness of the bulls to recognize that they might be in trouble suggests that their position is more dogmatic than based on reality.
"Dec. 31 is the average seasonal peaking day, and we fell from $3.99 on Dec. 28 to $3.10. You would think experience would ring some bells, but the thing about bulls or bears is that they say 'history doesn't matter' because it will be different this time," Zimmermann said.
Forecasters see a longer-term pattern developing with cold in the West and warmth in the East. "[Friday's] 11-15 day period forecast is also warmer than yesterday's forecast over the eastern two-thirds but a bit colder over the West," said WSI Corp. in its Friday morning report to clients. CONUS GWHDDs are down 6.3 for days 11-14 and are forecast to be 128.6 for the period. These are 26 below average!"
Near-term gas buyers Friday for power generation across the ERCOT footprint will likely see slim pickings from wind generation until the end of the weekend. "A sharp arctic cold front will sag southward and meander across the Panhandle and northern tier during the next couple days," WSI said. "This will lead to a sharp contrast of temperatures as readings in the 30s, 40s and 50s will bleed into western and the northern tier, including the Dallas metro, but the majority of Texas will remain unseasonably warm and humid with readings in the 60s, 70s to mid 80s.
"A northerly wind will lead to meager wind generation during the next two days, with output between 4 and 8 GW. A quick surge of south-southwest winds may lead to a spike of strong wind generation during Sunday with output as high as 11-13+ GW."
In spite of a tempered weather outlook, other analysts see most risk to the upside. "Although current stock that approximates average levels might appear conducive toward a neutral trading stance, [Thursday's] larger than expected supply decline is suggesting subsurface shifts that could remain well entrenched across the balance of the winter," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients.
"Power demand appears stronger than expected while export demand also remains stout. And with gas production has yet to see major response to a seven-month uptrend in drilling rig counts, we feel that the market will be anxious to respond upward to any shifts in the weather views. Speculative shorts have been placed back on the defensive via this month's price bounce of more than 30 cents off of the Monday lows."
In physical market trading gas for the four-day weekend fluctuated within narrow ranges at major market centers. Gas at the Chicago Citygate fell 2 cents to $3.30, and deliveries to the Henry Hub were quoted at $3.36, up 4 cents. Gas on Panhandle Eastern shed a nickel to $3.22 and Kern Receipts added a penny to $3.33. Gas priced at the SoCal Citygates changed hands a nickel lower at $3.62.
The typically volatile New England points were relatively subdued. Deliveries to the Algonquin Citygate added 19 cents to $5.02, but packages on Iroquois Zone 2 fell 35 cents to $4.23. Gas on Tenn Zone 6 200L eased 22 cents to $5.51.