With most areas destined to experience fairly pleasant Thanksgiving weekend weather, cash prices fell at a large majority of points Wednesday. It was a hodgepodge of overall softness, however, with Gulf Coast and Northeast locations tending to see mostly declines of a quarter or less, while triple-digit losses were common in the Midcontinent and West.
Somewhat curiously, the West also was the home of most of the points (Northern California, Pacific Northwest and Western Canada) that defied the overall market trend by rising up to a little more than a dime. Mountainous portions of the northern half of the region were predicted to have wet and snowy weather over the long weekend, and sub-freezing lows in Western Canada were keeping more Alberta production out of the export market than usual. In addition, PG&E lifted a systemwide high-inventory OFO that had been in place for Wednesday.
The majority of losses ranged from a couple of pennies to $1.45. A further decline of 3.1 cents in December futures Tuesday and the extra decline of industrial load associated with a four-day holiday weekend supplemented weak weather fundamentals as cash market depressants.
The California market displayed amazing contrast, with the PG&E citygate gain of about a nickel paired with the biggest loss of the day at the Southern California border into SoCalGas. The radically opposing price movements left the citygate with a premium of more than $2 over SoCalGas deliveries. However, the SoCalGas bulletin board provided some rationale for the disparity, saying that as of last Tuesday the utility's storage inventory of 127.2 Bcf was less than 2 Bcf less than total working gas capacity of 129.2 Bcf.
Despite Florida Gas Transmission keeping an Overage Alert Day in place through at least Wednesday, the Florida Gas Zone 3 dive of nearly half a dollar was unusually large in comparison with most of the Gulf Coast.
The Northern Natural Gas bulletin board provided a clue about the massive weakness of Midcontinent points. The normal system weighted temperature around Nov. 22 each year is 30 degrees, it said, but weighted averages of 46 degrees were projected for Wednesday and Thursday before an expected decline to 40 on Friday and Saturday.
Henry Hub's dip of about 15 cents left its basis about 30 cents back of December futures, which fell 27 cents to $7.718 Wednesday.
The Energy Information Administration's report of a 1 Bcf net storage withdrawal for the week ending Nov. 17 was well within the range of prior expectations but fell slightly short of consensus estimates for a pull around 5-6 Bcf. As analysts had noted beforehand, though, the actual number and direction of change were largely immaterial in the face of still-hefty surpluses to a year earlier and the five-year average, and the paucity of traders still around when the report was released made it even more moot, if such a thing is possible.
Despite the usual rush to begin the Thanksgiving holiday contributing to light trading in general, a Calgary-based marketer said he was actually a little busier than usual. Cash prices were "miserable" for the most part, he said, but Chicago citygates into Nicor were stronger than most because the LDC was limiting deliveries into its system and withdrawing storage to meet relatively meager weekend demand, which he called "a terrible method" of operating. Calgary-area temperatures would be going well below freezing during the weekend, he said, so intra-Alberta demand was strong.
The producer said he was getting some bidweek trading done and reported that Chicago deals were on the thin side, while Texas and Northern Natural-demarc points were fairly busy. Chicago physical basis tended to average around minus 2 cents Wednesday, he said, but it was hard to pinpoint because of uncertainties about how long the Nicor restrictions would last. He reported doing some Chicago sales at the NGI index plus 2-5 cents.
A Northeast utility buyer pointed out that his region is having "much milder weather" currently than in October when two-foot snows hit some sections. His company cut back on spot gas purchases for the weekend quite a bit due to low loads being projected. The utility has started slowly on storage withdrawal season, he said, adding, "We haven't needed to take out much" and he was still confident on having plenty of storage for the rest of the 2006-07 heating season.
Local weather was "really nice" Wednesday and expected to remain that way Thursday, which was a big change from snowstorms on Thanksgiving Day last year, said a marketer in the Upper Midwest. Her company had put in its baseload orders for December but hadn't worked out any basis prices yet, she said. At least the futures screen was going in the direction her company likes, she noted.
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