Although several points clung to flat showings, prices weakened further Thursday as a large number of locations fell, compared to a day earlier when about half the market saw a mild degree of firmness.
Chilly to moderate weather continues to limit heating load in much of the East, while most of the remaining substantially cold conditions are concentrated in relatively lightly populated areas such as the Upper Plains, Western Canada and parts of the U.S. West. A prompt-month futures drop of 5.5 cents a day earlier contributed to cash softness.
About 20 points were flat to about 2 cents higher, while losses ranged from 2-3 cents to about a quarter, with the Northeast and Florida citygates accounting for all of the declines exceeding single digits.
The Energy Information Administration pretty much hit the nail on the head in terms of consensus expectations in the mid 230s Bcf when it reported a 233 Bcf withdrawal from storage for the week ending Feb. 11. However, that failed to energize any bulls at Nymex as they essentially shrugged their shoulders at the report and nearly repeated the previous day's performance in sending March futures 5.3 cents lower (see related story).
Because of the Presidents Day holiday on Monday, Friday trading will cover flows for the Saturday-Tuesday period.
The bearish screen reaction to the storage report, the greater loss of industrial load during a long holiday weekend, and the continuation of generally moderate forecasts for much of the East make it highly unlikely that cash quotes will be able to stage a rally Friday.
Most of the Midwest was softer despite colder weather returning. For instance, Weather Central predicted that the Chicago area would fall from a high of 59 and low of 42 Thursday to 47 and 26, respectively, on Friday. Meanwhile, except for lows on either side of freezing in New England and northern New York, conditions will tend to range from chilly to merely cool in the lower Northeast, Mid-Atlantic and South.
Snowfall in the western U.S. will be largely confined to the mountain areas, while lower-elevation temperatures will be fairly cold but not getting much below freezing. Western Canada, particularly from Alberta through Manitoba, and portions of the Upper Plains along the Canadian border will remain the coldest market area for a while longer with lows around zero or in single digits.
PG&E discontinued a low-inventory OFO, and in response PG&E citygate prices slipped about 3 cents on IntercontinentalExchange (ICE) while volumes traded on its platform saw a sizeable drop from 1,013,300 MMBtu Wednesday to 895,2000 MMBtu Thursday.
However, although a comparable drop of about 4 cents was recorded at Henry Hub, ICE said hub volumes jumped from 579,100 MMBtu to 702,300 MMBtu.
The end of PG&E's OFO, combined with Texas Eastern and Maritimes & Northeast lifting negative imbalance restrictions, left virtually no substantive pipeline constraints in place. However, Tennessee anticipated the likelihood of curtailing all interruptible service through Station 214 in Ohio this weekend due to two of the four lines there remaining out of service following a rupture a week earlier.
A Rockies producer said although the storage number fit in with prior estimates, he thought there was some disappointment with it in the trading community because of the perception of withdrawals having been very heavy last week. But he noted that some pipes were limited on how much storage they could pull and were required to use linepack instead. Those pipes may be taking extra gas out of storage to rebuild the linepack they had lost unintentionally, he said.
The producer also thinks there may be more complacency about having plentiful storage than is warranted. He observed that Questar's Clay Basin facility has lowered maximum deliverability levels three times since the year began, including as recently as last Saturday (see Daily GPI, Feb. 15). Clay Basin contains less inventory now than at the end of February 2010, he said. The situation appears to be even more serious in Western Canada, he added, citing a statement by First Energy Capital in Calgary: "Strong inventory draws and high space heating demand is expected in Alberta, with overall storage levels nearing multi-year lows."
The producer thinks the cash market is going to mostly drift sideways to slightly lower for another two to three weeks, saying that if nothing else, coal-fired generation being switched to gas will prevent much of a further slide in prices.
©Copyright 2011 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.