March gas futures inched 5.4 cents lower Friday to $7.476 in a very quiet day of trading on this rare Feb. 2 when the famous Punxsutawney, PA groundhog failed to see his shadow, presaging an early spring. Little was revealed about what’s in store for this week, which is widely expected to be the coldest of the year for the Lower 48.

“It was a fairly tight trading range today with traders taking a little rest until we get some more definitive indications on [late February temperatures],” said futures analyst Jim Ritterbusch. The daily trading range was $7.425-$7.740, or about 31.5 cents.

Although not necessarily definitive, Punxsutawney Phil’s prediction of an early start to warm weather ran counter to the groundhog’s usual predictions of continued winter weather. Ninety percent of the time since 1887, the furry forecaster has seen his shadow and gone back in his hole to wait out the cold.

A two-legged prognosticator agreed, at least for the first half of February. “The models that I’ve seen today are generally skewed toward a little warming trend in the 11- to 15-day time window — nothing major, but enough to quell some buying interest. On the other hand, we have some really cold temperatures coming up in the next four to five days that are propping up the cash market and basis,” Ritterbusch noted. “You are going to see cash trading pretty strong here on Monday. We started out at $8 today. I wouldn’t be surprised to see $8.50-60 sometime on Monday or Tuesday.”

By Saturday, highs were expected to be only in the single digits across the Upper Midwest, with single digits and teens extending into the Omaha, Chicago, Green Bay, and Cleveland areas. Morning lows over the weekend were forecast as cold as 20 below zero across the Upper Midwest, according to Weather.com. That cold air was to be reinforced across the Midwest again Sunday, Tuesday, Wednesday and the coming Friday and Saturday. Below-average temperatures and lake snows also will be the main stories for the Northeast this week.

The market has high demand and large storage withdrawals ahead. The next storage report on Thursday from the Energy Information Administration (EIA) is widely expected to show a 200+ Bcf withdrawal, which will create a deficit compared to storage levels last year.

A deficit to last year’s storage level is “pretty much a done deal,” said Ritterbusch. “I think a 200 Bcf withdrawal is a pretty conservative estimate. Based on the heating degree days, I think the following week’s report should show even a stronger withdrawal.”

If this week’s report reveals a 200 Bcf withdrawal and the following week comes in with a 230 Bcf withdrawal, that would put working gas levels at 2,141 Bcf on Feb. 9, or about 140 Bcf below levels at the same time in 2006. Given the five-year average for withdrawals through the end of the heating season from that point on, working gas levels could end the season at around 1.5 Tcf, quite a bit below last year’s record high, but more than 300 Bcf above the five-year average.

The market’s ability to weaken in light of these statistics will depend on how soon below-normal temperatures turn up in mid-range forecasts, Ritterbusch noted. “We could handle those reports of [large storage withdrawals] if we start to see more temperature moderation in the forecasts, but it’s just not out there yet. Right now, it’s pretty much a standoff between the bulls that are citing the cold weather and the bears that are citing the continued storage surplus.”

AccuWeather is forecasting that for the next 30 days below-normal temperatures will be in place east of a line extending from El Paso, TX, to the Montana Idaho border. Only California is expected to be above normal. All of the near-term forecasts show below-or much-below normal readings centered over the Midwest and Northeast.

Frontier Weather expects 215 HDDs this week and 238 HDDs for the week ending Feb. 9. For the week that ended Jan. 26, there were 209 HDDs.

Earlier Opening Bell Has Little Impact

In an effort to bolster open-outcry trading volumes, Nymex on Thursday moved up its opening bell to 9 a.m. from 10 a.m. EST. While not much can be drawn from a day or two of trading, so far the move seems to have had the opposite effect. A total of 179,603 gas futures contracts traded on Feb. 1, but only 135,460 contracts exchanged hands on Feb. 2. Contract volumes in the trading pit also declined to 34,839 on Thursday from 42,041 on Wednesday.

“Obviously the trading hours are not the reason people buy or sell,” said Tim Evans of Citigroup. “People use the market because they either want to lay off a price risk or take on a price risk. None of that is a function of whether the market, or the floor, is open or not.”

Meanwhile, the mass exodus from the floor to the Globex electronic trading system continues. Globex has gone from representing about 29% of the total Nymex trading volume last September to 63% in December and 75% in January. Exchange officials recently reported that they were cutting trading floor costs and taking other measures because of migration of the business to the electronic platform.

Despite these moves, however, Evans is betting the floor stays open. Its state-of-the-art board and other systems are paid for, he noted. Even at diminished levels, energy floor trading volumes dwarf those of other commodities and other exchanges. In the end, there might be much fewer brokers around the natural gas ring, but it’s likely to remain in operation as long as it continues to help feed the exchange’s ever growing appetite, Evans said.

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