Physical natural gas prices for Friday delivery posted another set of strong gains in Thursday's trading with market points having access to Canadian markets showing multi-dollar gains. A handful of points in South Texas saw minimal losses, but nearly every other location showed gains of a quarter to 50 cents or more.

The Energy Information Administration (EIA) reported a withdrawal of 250 Bcf, about what the market was expecting, but after traders factored in a 7 Bcf upward revision to last week's inventories, much of the early bullish luster had worn off. At the close March had fallen 8.5 cents to $6.064 and April was off 9.4 cents to $4.856. The expired March crude oil settled at $102.92, down 39 cents.

Gains of $2 and $3 were common on pipelines with connections to the rapidly depleting Dawn storage facilities in western Ontario. Friday gas settled at Dawn at $15.65, up 35 cents, and that price lifted quotes from Michigan to Minnesota.

Said a Northeast marketer, "there is no storage at Dawn."

A Michigan marketer, clearly impacted by the shortages at Dawn, said it was “interesting how much the Toronto market has grown over the last few years. It's amazing how much it has increased, and now you are seeing all that increased load from all those new apartments.

"That by itself is whacking the Midwest. It is affecting everyone in a big way. They are projected to grow a lot more and it's not just Toronto but London [Ontario] and all those big cities. It's alarming and it's going to get worse," he said.

Quotes on Alliance rose $2.93 to $13.17, and on Northern Natural Ventura, Friday deliveries were seen at $12.57, up $3.40. Gas on Consumers rose $2.85 to $13.60, and deliveries on Michcon gained a stout $3.24 to $13.62. Gas on Northern Border Ventura rose by $3.76 to $12.79, and gas at Dawn jumped 35 cents to $15.65.

Gains at Northeast points were more subdued. Deliveries to the Algonquin Citygates gained 83 cents to $14.66, and packages at Iroquois Waddington added 24 cents to $14.87. Gas on Tennessee Zone 6 200 L added a stout 66 cents to $14.66.

Farther south on Dominion, next-day gas changed hands at $5.54, up 31 cents, and deliveries on Tetco M-3 Delivery rose by 12 cents to $5.48. Gas headed for New York City on Transco Zone 6 rose by 23 cents to $6.33.

Given the 60-cent surge on Wednesday by the March contract, the market response to the 250 Bcf withdrawal reported by the EIA was relatively mild. "People were looking for a number between 255 to 265 Bcf, but the market actually rallied from $6.01 to $6.04 before falling," said a New York floor trader after the number came out. "I think once traders factored in the 7 Bcf adjustment is when prices fell."

Analysts still see a bullish environment. "Although the 250 Bcf net withdrawal was slightly less than some of the newswire surveys, this was still a very supportive number that added 116 Bcf onto the year-on-five-year average deficit," said Tim Evans of Citi Futures Perspective. "With more cold in the forecast, we think the initial 'sell the news' reaction should prove short-lived, and that the upside will remain open."

The withdrawal was bullish when compared to both last year’s 131 Bcf withdrawal and the five-year average 133 Bcf pull for the week.

Inventories now stand at 1,443 Bcf and are 975 Bcf less than last year and 741 Bcf below the five-year average. In the East Region 129 Bcf were withdrawn and in the West Region 30 Bcf were pulled. Inventories in the Producing Region fell by 91 Bcf.

Turning attention to electricity generation, if current nuclear capacity is any indication, gas demand for power plants is high. According to the Nuclear Regulatory Commission's Power Reactor Status report, nuclear generation is the lowest it has been all year. After nearing 98% operating capacity at the end of January, the nation's fleet of nuclear plants is currently hovering just above 90%. There was nearly 9,500 MW of nuclear power offline Thursday, with the Midwest seeing the most outages at 81% capacity. The West region was running at 89% capacity, while the Southeast and Northeast came in at 94% and 95%, respectively.

Regional supply issues aside the broader market remain focused on another round of impending cold. Weather forecasts changed little overnight with forecasters still seeing another cold spell within the next three weeks. WeatherBell Analytics in its morning 20-day forecast says overall it would be an “impressive cold period (relative to normal), which will continue on through much of March."

In week one there is expected to be a “transition to a much colder pattern spread[ing] south and east. The amount of cold into Southern Plains is questionable, and by week two, cold turns 'brutal’ the Northern Plains through the Midwest and Northeast. A stormy pattern develops. New snow, or the threat of it, adds some uncertainty (as it would mean lower temperatures in those areas). The southern branch breaks through to attack the cold, with some ridging into the Southeast, while the West cools some."

By week three, conditions turn "cold and stormy as the mean trough reforms over the East, after a late week week attempt at a back and forth pattern (with the southern branch breaking through). The west is likely to warm back up again."

"I am not going to keep flogging a dead horse. The pattern problems are more in details rather than the overall theme," said WeatherBell Analytics meteorologist Joe Bastardi. "It's going to get darn cold, and the combination of attacks from the southern branch and arctic air dammed up across the North means that a stormy pattern will evolve. The front five days have a storm cutting into the Great Lakes, and the thaw ends after it.

“A light snow event through the Ohio Valley into the East this weekend marks the front edge of the first arctic air mass that plummets down through the Plains. A second snow event Monday into Tuesday from the Plains to the East Coast marks the edge of the brutal cold that causes the six-10 Day to look like Barney the Dinosaur painted in the Northern Plains."

Quantitatively, WeatherBell predicts an accumulation in the six- to 10-day period nationally of 172.7 heating degree days (HDD), well above last year's 114.7 and a 30-year average of 115.4. In the 11- to 15-day period it predicts 144.6 HDD, more than 15% above last year's tally of 122 HDD and also greater than the average of 108.7 HDD.

In overnight trading, Thursday "natural gas futures gyrated broadly in extremely heavy trading volume (52K lots) with the market initially sliding more than 25 cents to below $5.900 amidst light profit-taking. Gas prices then reversed and rocketed a little more than 25 cents higher to a fresh five-year high at $6.400 on expectations for a well above-average storage withdrawal and  forecasts for near record cold across the primary gas consuming regions of the country next week," noted Addison Armstrong of Tradition Energy.

The 10:30 a.m. EST release of storage figures by the EIA gave a clearer picture of just how low ending inventories can go prior the traditional April 1 start of the injection season. Inventories now stand at 1,443 Bcf and with six weeks left on the injection season, some analysts calculate the ending stocks could drop below 1,000 Bcf by the end of March.

Evans said "if we assume just five-year average withdrawals over the balance of March, then storage would hit 943 Bcf at the end of March, the lowest level since 2003. Overall the widening deficit represents a general upward fundamental pressure on prices, while the comparison with 2003 warns of a price spike similar to that year, which saw the nearby futures touch $11.899."

Tradition estimated the storage withdrawal at 270 Bcf and a Reuters poll of 24 traders and analysts showed an average 251 Bcf pull with a range of 212 Bcf to 270 Bcf. United ICAP was looking for a drop of 260 Bcf.

The Producing region salt cavern storage figure dropped by 32 Bcf from the previous week to 77 Bcf, while the non-salt cavern figure fell by 58 Bcf to 452 Bcf.

The EIA’s revision was the second in recent weeks. The previous revision resulted in lowering estimates of working gas stocks in the Producing salt region by approximately 8 Bcf for the week ending Jan. 24, while Thursday's revision increased working gas estimates in the Producing nonsalt region by 7 Bcf for the week ending Feb. 7, EIA said.