Nymex Drop, Weekend Load Press Cash Downward
Shrinking demand due to warmer weather throughout the country
conspired with a 6.1-cent drop on the Nymex futures contract
Thursday to put an end to a small and short-lived boost from a
relatively bullish storage report. Friday's cash prices retreated
an average of 3-4 cents in most areas, erasing the small gains from
Thursday's trading, and bringing cash back to the level it hovered
around most of the week.
"Prices were down across the board in reaction to the Nymex drop
and ahead of the typically low weekend load," one trader said.
Prices at areas such as the Houston Ship Channel, New York citygate
and the PG&E citygate were down as much as 7 cents on the day.
Intra Alberta prices also came down with Friday's reaction to
the Nymex slide, according to a Calgary-based marketer. "Looking
ahead, the weather is going to be unbelievable this weekend in
Calgary, with temperatures topping out at [about 70 degrees]," he
said. "The guys are talking about playing golf, which is definitely
not the norm for March in Alberta."
"The market is so dead right now that we're starting to look at
Feb-Oct. deals," said another trader. "A lot of end users are
looking to lock-in the one-year strip just because everything is so
low right now." He added that looking forward, the most expensive
month now is Jan of 2001 at 2.47 for Chicago citygate delivery. For
the one-year, Jan 2000 is the most expensive at 2.37. "This means
that for less than a year, your worst price is $2.37, which is very
tempting for utilities."
Taking a look at NGI's Daily Gas Price Index quotes at this time
last year shows the Henry Hub, Chicago citygate and the southern
California border were trading approximately 44 cents, 53 cents and
58 cents higher than current levels, respectively.
"This makes the current cash price levels reasonable by
comparison, taking into consideration the size of the year-on year
storage surplus," one source said. Moreover, looking back at
weather patterns at this time last year, "we find them to be
relatively close to current patterns. The only difference in this
case is that we started the last injection season with expectations
of a much colder winter and we ended up with a largely moderate
winter and too much gas in storage."
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