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Heating Load Sufficient for Gains to Dominate

The spot market showed some signs of returning strength as advances that were concentrated occurred in the West and Northeast outnumbered losses Tuesday, with flat numbers again in vogue. This came a day after a large majority of points softened.

One source also suggested that although analysts anticipate a fairly large storage pull being reported for last week, buying for injections is almost certainly picking up now that the market has left the traditional withdrawal season behind.

Most locations were flat to about 20 cents higher, with the Rockies recording most of the double-digit increases. Losses were minuscule in ranging from a couple of pennies a little more than a dime; only one exceeded about a nickel.

Nymex traders continued to deny any screen support to the cash market by pushing May futures another 5.8 cents lower (see related story).

Except for much of Canada, upper New England and parts of the Upper Plains, subfreezing lows have almost vanished from North America as the young spring season asserts itself in the form of milder weather. However, cooling trends are under way in the Northeast and most of the West, and several areas are due to still be bottoming out in the 30s Wednesday.

Meanwhile, it will be warming in the Midwest and South. But for the Midwest, that mostly means cool highs and chilly lows. And after a significant cooldown began the week, the South will only be getting back to mild temperatures, which are highly unlikely to prompt any air conditioning demand until they increase further later this week.

Pipeline restrictions of any consequence are virtually nil for now.

IntercontinentalExchange (ICE) noted that although Henry Hub quotes barely rose a penny or two, hub volumes on its online platform took a sizeable jump from 859,600 MMBtu Monday to 1,039,400 MMBtu Thursday.

Things were going the other way at the Chicago citygate. ICE said its Chicago prices fell a couple of pennies while trading activity plummeted from 819,900 MMBtu to 491,600 MMBtu.

A Houston-based marketer agreed with the general perception that it's "not all that warm" across the southern U.S., nor is it especially cold in most northern market areas. But Tuesday's gains seem to be evidence that some people must still be running their gas-fired furnaces, he added. His company's forecasting service indicates no appreciable warmup in the Northeast until near the end of weekend, he said.

The marketer expects mixed pricing again Wednesday, with Tuesday's futures weakness contending with weather-based demand for command of the market and storage buying being a wild card factor. There's a good chance of firmness remaining at many points, he noted, as some heat will be coming back to the South as the week progresses. There definitely should be much more cooling load in the Houston area with highs predicted to reach the mid 80s Friday and Saturday, he said. Currently, his company is dealing with "little" nominations cuts from various minor maintenance restrictions on Tennessee, but he was unaware of any transportation hassles of any consequence.

Tim Evans of Citi Futures Perspective anticipates that a storage pull of 58 Bcf for the week ending April 1 will wrap up the 2010-2011 withdrawal season for good, to be followed by injections of 31 Bcf, 40 Bcf and 56 Bcf for the weeks ending April 8, April 15 and April 22, respectively.

IAF Advisors analyst Kyle Cooper expects a smaller draw of 53 Bcf to be reported Thursday. The projection by Stephen Smith of Stephen Smith Energy Associates is even lower at 51 Bcf, which he said was up from his original estimate of 47 Bcf.

Credit Suisse's Hugh Li and Stefan Revielle barely topped the Evans estimate with their own expectation of a 59 Bcf draw. The Credit Suisse pair said U.S. cumulative heating degree days (HDD) had increased by more than seven, or 6%, to 134 HDD for the week ending April 1, "surpassing the previous 10-year maximum for the reference week."

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