The physical market overall was largely unchanged Friday although points in the Northeast skidded on forecasts of mild weather. Prices across the Midwest and the Gulf showed no more that a couple of pennies' movement either way. At the close of futures trading June had risen 2.2 cents to $2.509 and July was up by 2.0 cents to $2.589. June crude oil fell 95 cents to $96.13/bbl.
Although there was significantly more gas in storage because of the mild winter, utility buyers noted that there was still plenty of storage to fill at much lower prices than existing inventory. "We have about 2.7 Bcf of storage and have about three-quarters of a Bcf left, and we need to fill that back," a Midwest utility buyer said.
The buyer added that with about 2 Bcf of gas to purchase at presumably lower prices than gas currently stored, the average cost of gas was likely to drop significantly.
"It should have a significant impact on our average cost of gas. We are not actively buying spot gas for refill just yet. Northern has May as a 'dead month' so we are not allowed to inject or withdraw. We are just waiting for June 1 to kick in to start that activity," he said.
Quotes throughout the Midwest for the weekend and Monday gas were steady. Chicago Citygate, Alliance and Consumers were all steady to off a penny and Michcon slumped 2 cents. Northern Natural Gas Ventura rose a penny.
Weather patterns for the weekend and early in the week in the Midwest were expected to be benign. AccuWeather.com forecast that the high in Chicago was expected to be 67 Saturday, 69 Sunday, and 73 Monday. The average high this time of year in the Windy City is 68.
Quotes at a few Gulf points inched higher. ANR SE, Columbia Gulf Mainline, Henry, and Tennessee 500 L were all flat to up a penny, while Tetco E LA added a few cents and Katy was unchanged.
Northeast points plunged as warm, mild weather was forecast. AccuWeather.com predicted the high in Boston Saturday would reach 75, Sunday would climb to 78, and Monday was expected to be 71. Nighttime lows were expected in the upper 50s. The normal high for Boston this time of year is 64.
Quotes on Algonquin fell 6 cents, and gas into Iroquois Waddington shed a nickel. Gas deliveries on Tennessee Zone 6 200 L dropped close to a dime.
Futures traders see a resilient market. "We are sitting here at $2.50 and it doesn't seem to want to go lower," said a New York floor trader. "I think we are set up for a rally to $2.60-2.65 next week and then we top out. I think we are seeing mostly short covering, but there may be some people jumping in on the long side."
June futures didn't exactly smash through $2.50 resistance Thursday after the release of what by all accounts was an expected Energy Information Administration inventory report. However, futures maintained their upward price momentum Friday with the 2.2 cent advance to $2.509.
"Although our stance remains neutral, we still see additional upside price risk to around the $2.61 area. We feel that a fresh round of highs above the $2.51 level could trigger additional short covering that could advance nearby values by more than 12 cents off of [Thursday's] settlement," said Jim Ritterbusch of Ritterbusch and Associates in a note to clients.
"We continue to emphasize the power of price momentum as we will be viewing a close above $2.50 as prompting a quick trip to about the $2.61 area," he said. "While this price rally will eventually provide some favorable selling opportunities, we feel that it is premature to approach the short side of this market pending technical signals such as a key reversal, failure off of expected resistance or inability to respond to positive headlines."
Positive is in the eye of the beholder, but near-term weather forecasts call for above-normal temperatures throughout most of the country. MDA Information Systems in its Friday six- to 10-day outlook showed above normal temperatures defined by a sinuous ridge centered over Wisconsin and stretching from Nevada to northern Maine. Only Texas and the Southeast are expected to be normal or below normal.
"This period carries similar themes to the forecast made [Thursday], though there were again some detail adjustments. These included a slightly warmer Midwest, where much aboves are now favored on the period composite. West-Central Canada was cooled to below normal as supported by the return of the WPO [Western Pacific Oscillation] signal. This outlook for a warm North and cool Gulf Coast continues to greatly limit both heating and cooling demand, respectively. The West will start the period warmest before dropping closer to normal by mid to late period."
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