Unable to ignore the 22-cent hike in April natural gas futures values on Thursday, cash point averages across the country followed suit on Friday with upticks mostly between a dime and 20 cents.
Despite a sweeping warm-up that was engulfing a number of eastern regions, the East saw the largest upticks in the cash market with Algonquin citygates and TGP-Z6 200L both adding north of 20 cents to their respective averages, according to IntercontinentalExchange (ICE).
Gains along the Gulf Coast were mostly in the 10- to 15-cent area, while in the Rockies and the West, most increases were short of a dime, according to ICE data.
The universal strength in the cash market Friday came as no surprise to traders following Thursday's bullish natural gas storage report, which bumped April futures above $4 to close at $4.158. The screen had something for everyone on Friday. While the front-month contract failed to keep the upward momentum, it managed to hold Thursday's gains, plus a penny, to close at $4.168.
"A lot of the strength we saw Thursday and Friday I attribute to Thursday's bullish storage report of a 56 Bcf draw," said a West Coast trader. "I think it really surprised a lot of people, as evidenced by the 22-cent jump in April futures Thursday. That said, I don't think the market has much more room to run higher."
He told NGI he believes the current weather picture will keep prices capped. "We are supposed to be a little below normal on the West Coast, but it is nothing earth-shattering where we are going to pull a lot of gas out of the ground," he said. "The demand just is not there right now, but it is pretty typical for the middle of March. They don't call it the shoulder season for nothing."
Traders were given conflicting information on the health of the natural gas drilling segment Friday as the overall number of rigs drilling for the commodity sank to nearly 14-month lows, while unconventional gas rigs showed an uptick in numbers.
According to Baker Hughes Inc., the total number of rigs actively drilling for natural gas in the United States dropped by seven to 875, a level that has not been seen since late January 2010. Baker Hughes horizontal rig count -- which includes rigs targeting shale oil and gas -- increased by five to an all-time record level of 986 rigs.
According to NGI's Shale Daily Unconventional Rig Count (http://shaledaily.com), which utilizes county-level rig data provided by Schlumberger's Smith Bits to more accurately target drilling levels in individual shale plays, rigs operating in North American shale and unconventional plays increased for the week ending March 18. The largest uptick was seen in the Eagle Ford Shale in South Texas, which increased by six rigs to 163. The largest decrease for the week was seen in the Cana-Woodford in Oklahoma, which declined by four rigs to 59.
Analysts continue to downplay the immediate impact to energy supplies following the Japan tragedy. Analysts at Tudor, Pickering, Holt & Co. Securities Inc. (TPH) said nuclear fears continue to drive the gas-coal bid in the market. They added that the theme "may make sense long term as bias shifts to fossil generation to meet global electricity demand growth," but in the short term, the impact from the disaster will be muted for energy. They noted that an extreme case of immediately taking 10% of the global nuclear fleet offline increases coal or gas demand by only 2-3%.
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