Northeast Rebounds Big-Time, Rest of Market Softens
As presaged by reports of falling numbers in late deals Wednesday, prices fell between about a nickel and 30 cents at most points Thursday with seriously cold weather remaining largely confined to the Midwest, Northeast and some parts of the Rockies. Northeast citygates, where a return to the deep freeze was impending following Thursday's brief respite from frigid conditions, again ran contrary to overall trends with gains on either side of a dollar.
Price drops appear destined to continue Friday, with at least one source doubting that even the Northeast can withstand bearish market signals. It was definitely understating the reaction to say that the Energy Information Administration surprised a lot of people with an unexpectedly low report of 156 Bcf in storage withdrawals last week. Although a very wide range of prior expectations had gone as low as 150 Bcf, the vast majority of guesses were closer to 200 Bcf than to 150 Bcf.
Nymex traders took the report and ran -- downhill. The February futures contract's ultimate decline of more than 30 cents represented a recovery of nearly 20 cents from its daily low. Because the negative action took place late in the cash trading morning, it is expected to have most impact on Friday's physical prices, which will also be dampened by the lessened demand of a weekend.
Even more than the report's falling short of expectations, it was the fact that a relatively small pull occurred while the Northeast was experiencing the harshest winter weather so far in the season that fed highly bearish sentiment. Also, the current inventory surplus over year-earlier and five-year average levels made stout jumps.
There was quite a stir among cash traders over the subpar drawdown. "Once the EIA's report was released, I head the traders yelling and screaming on the floor," said a back-office staffer for a large marketing firm. "It was an exciting morning."
After seeing futures plunge about half a dollar in its initial reaction to the storage figure, one eastern producer smugly quipped, "Oh, I can safely say there was a reaction. Cash mostly got done early, so the EIA's report had little effect on the weighted averages of swing gas. Just the same, the screen tanked. The floor just dropped out from under it and prices are still spiraling down."
It's "pretty cold" in the Midwest but not all that terrible, commented a marketer. It was a bit puzzling that Midwest delivered prices joined the general softness even though regional temperatures were significantly lower than those in the Northeast, she said. The Midwest will stay snowy into the weekend but will warm up a bit to highs in the mid 20s early next week, the marketer said. The bottom line, though, is that "we'll stay below freezing for at least another week."
Meanwhile, a Northeast trader said there was early buying interest at the citygate that later petered out. Dracut started around $7.50, rose to $9.00, then retreated back to $7.50, going a long way just to wind up in the same place, he added. "It's getting a little colder again in the Northeast, but nothing we can't handle." He certainly doesn't expect to see any big explosion in prices like those into the $50s, $60s and $70s last week. He noted that his city had warmed up considerably since a week ago, saying, "We're now around freezing."
Even though Florida Gas Transmission and Northern Natural Gas still had OFO-like constraints in place, prices on both pipes fell about 20 cents or so.
The National Weather Service sees little relief from very cold weather in northern markets through next week. In its six- to 10-day forecast released Thursday, NWS predicted above normal temperatures only in Northern California and the Florida peninsula. Below normal readings are expected through nearly all of the northern half of the U.S. except for Oregon and southern Utah.
A Weather 2000 advisory Thursday commented, "December 2003-March 2004 has been, and will be, putting up impressive HDD [heating degree day] totals and extreme cold temperature occurrences, and we've only just begun four weeks into calendar winter." As for storm tracks, the New York City-based consulting firm said its research "is showing signs that after about three to four weeks of nor'easters being in the spotlight, followed by three to four weeks of Alberta Clippers and lake-effect events taking center stage, we should be returning back to a proclivity for nor'easters again. In addition to the obvious complications that snowstorms yield, this will have implications for how cold temperatures could reach and how far south the cold could penetrate." Currently it's the Midwest that is facing the fiercest conditions, it added.