It failed to surprise any traders when prices fell at all but one point Friday. Despite cooling trends in the Midwest and South, moderation dominated the general weather outlook; the latest storage withdrawal report reinforced the perception of plentiful inventories (especially when the Producing region had an unusually early net injection); prompt-month futures had fallen 4 cents on the previous day; and the decline of industrial load during a weekend was a minor bearish factor as usual.
Flat Sumas quotes constituted the sole exception to overall softness. Most losses were in single digits amid an overall range of 2-3 cents to the $1.60 area. The Northeast again was home to all the triple-digit downturns, although they were significantly smaller than those on Thursday.
April futures broke a three-day losing streak with a gain of 3.1 cents Friday (see related story), which will provide a small amount of support for Monday's cash market.
Low temperatures in the Midwest were forecast to be sinking back under the freezing level during the weekend, while the Northeast could expect to stay well above freezing, even in formerly frigid upper New England. That was partially reflected in Algonquin ending a negative imbalance restriction Saturday.
Thermometer levels were also predicted to be going south in the South, but only northerly sections of the region would get as low as the 30s. A continuing warm-up in much of the West would do much to counteract the southern cooldown, with Phoenix predicted to get almost toasty with a high around 80 Saturday. The Upper Plains and Western Canada appeared to be the only regions still experiencing harsh cold, with lows in single digits and around zero or below forecast for the Dakotas and Alberta, respectively.
A high-linepack OFO by SoCalGas (see Transportation Notes) was accompanied by price declines of about 7 cents and a dime at the Southern California border and SoCal citygate, respectively, according to IntercontinentalExchange (ICE). Meanwhile, border volumes on the ICE trading platform rose from 572,500 MMBtu Thursday to 602,600 MMBtu Friday, but citygate activity took a huge hit of well over 50% in dropping from 714,000 MMBtu to 323,100 MMBtu.
SoCalGas' neighboring utility to the north, PG&E, also issued a high-inventory OFO, and while the PG&E citygate saw a modest drop of less than a nickel, its ICE volumes plummeted from 1,309,000 MMBtu Thursday to 907,200 MMBtu Friday.
Noting the substantial amounts of snowpack accumulated this winter in the West, a Rockies producer said the presumed abundance of hydropower is "really going to hurt" gas prices unless there is extended cold weather during the spring. Ruby Pipeline might be completed to the Pacific Northwest in July having little market-area demand as a result of gas-fired generation being idled in favor of using cheaper hydropower, he said.
However, the producer went on, an especially big nuclear maintenance period is coming up; he understands that about 45 nuclear units will go down for maintenance for varying periods and at various times during March and April. That may help offset the negative gas price impact of an estimated 1.5 Bcf/d loss of generating market share to hydropower this spring, he said.
The Rockies market is currently getting warmer, he said. It can expect further cold snaps through as late as May, but the worst of winter has passed, he added.
And a Midwest utility buyer said his company will see no shortage of substantive heating load anytime, reporting a local wind chill factor of 20 degrees Friday afternoon. Demand is remaining strong into March so far, he said, and he sees no signs of getting much warmer for at least another week or more.
Customers are expressing surprise at seeing the utility's gas rates go down this month, the buyer said, mainly because they're seeing such high prices for crude oil and at the gasoline pump. He suggested that they might not understand the huge price disconnect that has developed between oil and natural gas.
Most analysts would agree that it's a positive development for the market (in the sense of helping to limit the climb of production) as the number of drilling rigs searching for gas in the U.S. declined by seven to 899 during the week ending March 1, according to the Baker Hughes Rotary Rig Count. All of the deactivations happened onshore, with the Gulf of Mexico count unchanged at 21. Its latest tally is 1% less than a month ago and down 3% from the year-earlier level, Baker Hughes said.
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