Market Marks Time With Mild Post-Weekend Firmness
With just a smidgen of mild softness in the mix, prices mostly ranged from flat to up about 15 cents Monday. A clear majority of gains were in single digits. Forecasts calling for chilly to cold but hardly severe weather in much of the U.S. and Canada this week -- seasonable conditions, in other words -- plus returning industrial load after the weekend were chiefly responsible for the modest rally.
Several of the day's larger gains occurred in the West, where an arctic cold front was moving south from Canada into the upper Rockies. Midwestern markets may get a boost Tuesday as an arctic blast is due that night from the northern Plains through the Upper Midwest.
But meanwhile, trading activity remained on the quiet side Monday in the midst of fairly benign weather influences. "We've made it over the hump," said a Gulf Coast producer who concentrates on Northeast markets. "If it gets cold again, it won't be sustained like it was in January." Cash prices started out strongly, then came off later in the day, he added. Early trading for Feb. 11 flows appeared to be flat Monday afternoon, but the producer anticipates softening Tuesday "since it is going to be so nice this week." However, market-area weather this weekend "could get significantly colder, so come Sunday we might see frozen Valentines lying about."
A marketer in the Midwest said snow was still on the ground in his area, but he could find "no life in this market right now." Utility buying is fairly light as they lean a bit harder on storage accounts while the end of the withdrawal season draws nearer, he said. The marketer noted that utility rate increases went into effect in Michigan Feb. 1, "and we think that's going to throw some new business our way" from consumers trying to find cheaper gas.
A utility buyer in the Northeast confirmed that his company's load was not very substantial for Tuesday, due to moderating weather that is expected to be fairly seasonable through the rest of the week. "We're only pulling about half as much storage as we're entitled to," he said. The bottom line is that most utilities are "sitting pretty comfortable for right now, although weather could change that situation pretty quickly."
Sonat and El Paso signaled the market's slowing down by canceling OFOs that had been in effect when the weekend started, while Northern Natural Gas declared a new OFO-like restriction for Tuesday but then canceled it due to milder weather forecasts (see Transportation Notes).
One trader was puzzled that with California expecting highs in the 70s Tuesday, "it's a wonder why we had as much positive price movement [in the West] as we did."
Saying last week was about 15% colder than normal, Lehman Brothers analyst Thomas Driscoll anticipates a "strong" storage withdrawal of 205 Bcf to be reported for the week ending Feb. 6. He lowered his end-of-season stockpile estimate by 50-75 Bcf to 1,025-1,050 Bcf to reflect last week's below normal temperatures. Kyle Cooper of Citigroup reported his final estimation for this week's EIA report to be a draw in the 180-190 Bcf range.
Don't count winter out yet as some appear to be doing, warned Weather 2000 in an advisory Monday. Rumors and erroneous forecasts are "either calling or insinuating that this winter season ended on January 31st," the New York City-based consulting firm said. Its warning was not intended to "poke fun" at such claims for the sake of humiliation, "but rather to wake everyone up to the unfolding (severe) reality of the current and future weather picture. This is analogous to the potential catastrophic consequences of declaring that a hurricane season is over on August 31st."
Either there is an air of denial, and/or erroneous forecasts are being disseminated for personal gain/manipulation, and/or the record-shattering weather of January has set the psychological "impressiveness" bar too high to reach, it went on. "Whatever the culprits and causes...this winter means business, and we're only nearing the half-time show. Six of the top nine snowiest months of all time (130+ years) in New York City, for example, happened in February and March. And this year New York is presently running a streak of 24 consecutive days with snow on the ground."
February has already been very cold for the U.S. as a whole, Weather 2000 said, and it expects the "ferocity of arctic plunges will likely be turned up a few notches" during the next one to two weeks.