The cash market turned in a mixed performance Monday that was almost evenly divided among rising and falling points but leaned slightly to the upside. A bit of cooling load in the South and heating load in the West provided support, while forecasts of normal to above normal temperatures in northern market areas (along with Friday's nickel drop by April futures) dragged some points lower.
Flat quotes were fairly common among gains that ran as high as nearly 60 cents and losses that were mostly small but peaked at a little more than 90 cents. Both the largest advance and the largest drop occurred in the West. Cheyenne Hub led losses due to anemic demand from Midcontinent/Midwest markets.
Once again the cash market will be unable to count on prior-day futures support Tuesday, but the guidance will be slightly less negative after the April contract inched another 1.5 cents lower Monday. The slight softness in natural gas came amid strength in Nymex's petroleum product offerings as international tensions increased over Iran's arrest of 15 British soldiers in the Persian Gulf late last week.
Western markets were being pulled in both directions by opposing influences. On one hand, heating demand was fairly substantial with wintry conditions returning in mountainous areas, and heavy snow was predicted for Tuesday in the ranges of western Montana, Idaho, northeastern Nevada and Utah, according to The Weather Channel. On the other hand, Southern California Gas is well into the second week of a high-linepack OFO, having extended through at least Tuesday an OFO that was implemented March 20 (see Daily GPI, March 19). And Kern River reported high linepack systemwide Monday.
Despite the OFO's continuation, the Southern California border rebounded from Friday's big loss with a gain of about 45 cents Monday.
Another price depressant for the Rockies was the scheduled week-long shut-in of Questar's Clay Basin storage facility to injections that starts Tuesday (see Transportation Notes), which eliminates a secondary outlet for new production.
Other than highs in the 40s in Midwest states along the Canadian border, heating load will be pretty scarce Tuesday outside the mountain West. Above normal temperatures will be fairly comfortable in the Midwest and Northeast, with highs unlikely to exceed the 70s. However, the South likely is seeing perceptible air conditioning demand by now as highs in most sections are expected to hit the vicinity of 80 Tuesday.
A Texas-based marketer said he saw relatively little change in daily prices in the markets that he trades. It was mostly a "sideways" market that depended on local conditions more than anything else for price direction, he added. Some of the firmness was attributable to a "lot of people trying to cover end-of-month imbalance issues" and others "cleaning up" after the weekend. As an example of the latter, he noted one customer that had bought a lot more gas than usual Friday but was trying to unload it Monday.
The April bidweek began with the Chicago citygate trading at paper basis of minus 40 cents, the marketer continued. However, indexed deal premiums are "huge," being offered as high as the NGI index plus 20 cents, which would reduce physical basis to about minus 20 cents, he said. All the suppliers "seem to be thinking they're going to get a Nicor premium" (Nicor tends to restrict deliveries more often than other Chicago-area LDCs), but not all gas at the citygate can be absorbed by Nicor, he said.
After last week's report of a pre-season storage injection, Citigroup analyst Tim Evans sees one more withdrawal of 10 Bcf for the week ending March 23 before predicting that the industry will return to injection mode with a build of 45 Bcf for the week ending March 30. Evans also noted that from a fundamental perspective, "the natural gas market remains in tension between the near term in which a rising 237 Bcf year-on-five-year-average surplus threatens to drag the market lower and the intermediate to longer term where summer heat and hurricanes could at least keep the market tighter than a year ago, even if it fails to work off the longer-term surplus.
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