Following the price strength seen over the first two trading days of the week, most cash market points on Wednesday declined despite the fact that the Northeast, Great Lakes Northern Plains and parts of the Mid-Atlantic and Midcontinent are still shivering under below-normal temperatures. After being one of the largest gainers to begin the week and recording twin $20 highs, Transco Zone 6 New York on Wednesday registered the largest drop, shedding nearly $6 to average just shy of $11.85/MMBtu.
Out West, most points trickled a couple pennies lower or remained flat. SoCal Border dropped four cents to average $6.85. The Henry Hub shaved off a nickel to average just north of $7.50 while the Chicago Citygate dropped six cents to $7.39.
While snow flurries were seen in the Northeast and in some Mid-Atlantic points on Wednesday, the market's weakness could be attributed to the warm-up expected next week. According to the National Weather Service's latest six-to 10-day forecast covering March 13-17, a vast majority of the United States is expected to enjoy above-normal temperatures with the exceptions of Alaska, the very southern tip of Florida and the very northern part of the state of Washington, which are expected to exhibit below-normal readings. Central Florida, northern Wisconsin, Minnesota, North Dakota and the remainder of Washington state are expected to experience normal temperatures during the period.
"On Wednesday we saw gas prices slip a bit lower than the prior two days," said one Northeast marketer. "Temperatures are still cold, but we saw power-demand retreat somewhat and utilities are backing off a bit. The story is this market is experiencing a slow death price-wise. I think we will continue to see prices move lower Thursday and into the weekend as things get back to a more seasonal pattern."
A further decline could be possible, especially if cash prices follow futures lower. After rallying on Tuesday, April natural gas futures on Wednesday declined by 10.6 cents to close at $7.366.
The marketer added that despite colder-than-normal temperatures from the Northeast down throughout Virginia, he expects that to turn around rather quickly. "While I hear it is snowing in Washington, DC, the cherry blossoms will be blooming by Tuesday," he said.
A Southern California trader said the market Wednesday was pretty quiet. "The cold weather out here has come off a bit and it looks like power generation is down, so spot prices should drift lower accordingly," he said. "Right now it is not cold enough to run your heater but not hot enough to run your air conditioner, so we are having some real nice Southern California weather, which results in reduced demand."
Looking at the storage report Thursday for the week ended March 2, the trader said people are still talking about a draw between 90 Bcf and 105 Bcf. "Nobody is too damn excited one way or the other," he said. "It depends on how heavily people wanted to pull down storage last week as opposed to trying to roll it. We are still above the five-year average, so I think we're pretty safe for the remainder of the withdrawal season."
One week after falling below the 200 Bcf withdrawal level, some within the industry believe Thursday's Energy Information Administration (EIA) storage report will reveal a sub-100 Bcf pull. A Reuters survey of 22 industry players produced a range of expectations from 94 Bcf to 124 Bcf and a median drawdown estimate of 102 Bcf. The number revealed Thursday morning will be compared with last year's 97 Bcf withdrawal for the week and the five-year average pull of 117 Bcf.
According to Golden, CO-based Bentek Energy, the company's Flow Model methodology indicates a withdrawal of 96 Bcf, bringing stocks 13.8% below the five year high -- which occurred last year -- and 14% above the five-year average. The company expects a 74 Bcf withdrawal from the East region, a 17 Bcf pull from the West region and a 5 Bcf subtraction from the Producing region. If a 96 Bcf withdrawal is realized, Bentek noted that the stock level of 1,637 Bcf would be 59 Bcf below the 1,696 Bcf level reached at the end of the 2006 withdrawal season on March 31.
However, by looking at other statistics, storage levels could still be quite comfortable following the last five storage reports of the withdrawal season. According to the EIA, the five-year average finish to the withdrawal season sits at 1,232 Bcf, while the minimum amount of gas in storage at the end of a withdrawal season over the last five years sits at 694 Bcf, which was recorded in 2003.
In addressing Thursday's storage report, the Northeast marketer said he expect to see a withdrawal of 97 Bcf for the week and season-ending inventories at a "comfortable 1,400 Bcf."
Bentek's Daily Storage Range report indicated a range of withdrawal expectations from 88 to 104 Bcf with a midpoint of a 96 Bcf pull. Bentek's Supply/Demand Balance view in its Weekly Market Recap published last Friday indicated a 90 Bcf withdrawal estimate.
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