Despite a warm-up in the northeast and a bearish storage build during withdrawal season, the cash market took its cue instead from Wednesday's natural gas futures rally, pushing points 8-40 cents higher across the country on Thursday.
The Energy Information Administration report that 17 Bcf had been injected during the week that ended March 16 caught some in the industry -- who were expecting a couple more withdrawals before the season ends on March 30 -- off guard. The injection for the week was the first ever during this week of March. The closest the industry has come to seeing an injection during this part of March occurred during the week ended March 21, 2003 when 6 Bcf was injected.
Natural gas futures traders were unfazed by the seemingly bearish injection. After gaining a quarter on Wednesday, traders added another 16 cents to the April contract on Thursday, resulting in a $7.32 settle.
Some saw the injection as direct commentary on the price of natural gas on the market relative to natural gas in storage. "With the cash market under $7 and down at the levels it was at, it was much more palatable to go into the market for gas needs as opposed to pulling higher-priced gas out of storage," said Steve Blair, a broker with Rafferty Technical Research in New York. "That is likely one of the reasons we saw this injection."
Despite enjoying spring temperatures Thursday, Northeast cash prices jumped from 20 cents to near 40 cents. AccuWeather advised that while spring officially began Tuesday, temperatures on Thursday finally began to play the part. "Warmer air being drawn in from the southwest ahead of a cold front will allow temperatures to dramatically rise into the 50s and 60s across most of the Northeast -- a nice apology from Mother Nature for letting winter extend its stay by one day," said Eric Wanenchak, an AccuWeather meteorologist. "With no cold air from Canada following the cold front, which will spread showers east of the Appalachian Mountains [Thursday night], the warmth will persist into Friday."
However, the forecasting firm warned that all good things must come to an end, sometimes as quickly as they were started. "Unfortunately, the warm weather will not last very long in the Northeast," Wanenchak said. "A cold front will move from the Great Lakes into the Northeast during the day on Friday, ending the warm weather in the region after just one day. The frontal boundary is expected to stall out this weekend over the Ohio Valley and Mid-Atlantic. Temperatures will be somewhat cooler in areas north of the frontal boundary, with highs in the 40s and 50s across New England. Meanwhile, locations south of the front will continue to experience unseasonable warmth, with high temperatures approaching 80 as far north as Nashville, and in the mid- to upper-80s from southwestern Georgia to southern North Carolina."
Prices in the Midcontinent were up from almost a dime to a nearly 20 cents on Thursday. "Cash was stronger Thursday and I think that had a lot to do with the 25-cent rally in futures Wednesday," said a Midwest trader. "That pulled the cash up. After the bearish storage number came out, cash got pushed down a little bit."
The trader added that some pipe activity could have also weakened prices later Thursday morning. "Of note was Nicor Gas Co. in Chicago, which capped the amount of gas that could come into its pipes," he said. "That pushed NGPL TexOk supply weaker. I also bought a package of April physical gas at a fixed price at Consumers Thursday for $7.36 We started out at TexOk around $6.47 to $6.48. We finished the day near $6.330 and $6.340. I sold packages of gas at TexOk at both $6.33 and $6.43 on the day. It was very volatile and really seemed to get weaker throughout the morning. I think it really was because Nicor was capping its pipe."
The trader labeled the 17 Bcf injection storage report from the EIA as an "anomaly," adding that the injection surprised a lot of people. "The number made me do a double take to make sure I actually saw what I thought I saw," the trader said. Despite the injection, he expected a return to withdrawals in next week's report for the week that ended March 23.
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