Prices fell by large amounts across the board Thursday. An impending change to colder weather would not yet be under way to any significant degree Friday, and cash quotes felt the negative pressure of the previous day's futures plunge of nearly 60 cents. The screen traded Thursday morning nearly $1.50 below the $9.82 peak it had reached during Wednesday morning's cash market activity.
Declines were fairly consistent across geographic market areas in ranging generally from a little under half a dollar to about 90 cents (Transco Station 30's drop of about 35 cents was the only one out of that range.
As of Wednesday most points were priced at premiums to first-of-month indexes, but Thursday's plunges took a large majority of them to deficit positions. The few that maintained flat to moderately higher levels above index were clustered primarily in South and East Texas. Four Northeast citygates fell to dollar-plus deficits.
Making a call on Friday's cash market direction was tough, one source said. Heating load would be building over the weekend in several areas, making an argument for firmer prices, he said. On the other hand, such support would be arrayed against Thursday's 37.6-cent screen drop, the bearish storage situation -- which was reinforced by Thursday morning's Energy Information Administration (EIA) report -- and the typical weekend slump in industrial demand.
EIA's estimate of an 88 Bcf storage withdrawal for the week ending Jan. 27 dovetailed nicely with industry expectations, but much like the previous week's report it was still treated bearishly by Nymex traders because of the unfavorable comparisons with much larger historical draws (see futures story). With less than two months to go in the traditional withdrawal season, storage inventories still stood at a hefty 2,406 Bcf at the end of last week, EIA said.
The South will be getting very wet but remain unseasonably mild Friday, according to The Weather Channel, but then colder air following the stormy low-pressure system will start to bring snow to the upper reaches of the region Saturday, and the snow will be spreading to more southerly latitudes early next week. Snowy weather would be confined to limited areas Friday in the Midwest and Northeast, it said, but expanding over the weekend into much larger territory. Little change is expected in the West, where snow and freezing temperatures will remain largely in the mountainous sections only.
Famed Pennsylvania groundhog Punxsutawney Phil threw a bone to starving gas market bulls by seeing his shadow Thursday morning, which means six more weeks of winter, of course.
This is winter? Temperatures were forecast to peak around 90 degrees Thursday in the southern end of Texas, with more of the same expected Friday.
"We're supposed to start cooling off tomorrow [Friday]" but not expected to see freezing temperatures until early next week, said a utility buyer in the Lower Midwest. "I hope it's so," she said of the impending freeze because her company needs to raise system throughput in order to use up some of its storage gas.
The buyer added that she had read that the groundhog's forecasts are only about 30% accurate, which is not a bad batting average in baseball but not so good in weather forecasting. Most people could do as well or better by flipping a coin, she said.
Using a phrase that has been popular among industry analysts recently, a Midcontinent producer said it would be "too little, too late" for seasonable winter weather during February to have any significant effect on supporting prices. He said he was "waiting for prices to rally in order to sell some of our unhedged storage gas," but was pessimistic about any substantive price rebounds. "The party is over, as far as I'm concerned. It's been a good party for a lot of folks...but you can't do anything about Mother Nature," he said. He predicted that Midcontinent cash numbers should be down around $5 by the end of March because of excess storage.
Saying he looks for prices to be close to flat Friday, the producer commented that he expects cash to start high and then move lower, which would be the opposite of Thursday's movement during trading.
Calling it "Stage 1 of winter's return," Weather 2000 said the first wave of polar air is on cue to arrive in the U.S. over the weekend and reduce warm anomalies to near-normal. "Chicago will turn its back on the 40s and 50s seen throughout January and return to near normal highs in the low 30s," the New York City-based consulting firm said in an advisory Thursday. "But this is only the first wave. When the second, third and forth waves come crashing across the border, bringing arctic air by the middle to end of next week (and beyond), Chicago will struggle to get out of the teens.
"Many northern tier locations would be even colder with these temperatures if it weren't for the lack of snow cover. The January thaw ate away at much of the snow cover laid down during December, but this is about to change, especially along the Great Lakes. The warm January has kept the Great Lakes mostly free of ice, which means the lake effect snow engine will be free to crank full tilt as the cold air begins to invade this weekend and beyond. The returning snow cover (from lake effect and other winter storms) will be an important positive feedback for colder temperatures."
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