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Cash Firms, But Futures Traders Nervously Await EIA Storage Stats

Next-day gas rose Wednesday as forecasters called for temperatures at about normal levels but predicted turbulent and windy conditions capable of sending readings into the below normal camp. With the exception of a handful of points, locations posted gains typically a few pennies on either side of a nickel.

Double digit gains were seen in New England and in the Great Lakes prices ranged from unchanged to a few cents higher. At the close of futures trading May eased nine-tenths of a cent to $4.730 and June retreated 1.1 cents to $4.747. June crude oil shed 31 cents to $101.44/bbl.

At first glance temperature forecasts wouldn't seem to be all that supportive, but a closer look showed strong winds at eastern locations adding about 5 degrees of wind chill to otherwise normal temperatures. Wunderground.com forecast that Boston's 55 degree high on Wednesday would rise to 58 on Thursday and reach 60 on Friday. However, Boston was expected to see winds of as much as 24 mph Thursday, thus sending wind-chill temperatures down to about 53. The seasonal high in Boston is 58. Albany, NY's Wednesday high of 55 was seen advancing to 59 Thursday and 64 on Friday. The normal mid-April high in Albany is 62. Washington, DC, was forecast to see its Wednesday high of 61 reach 65 on Thursday and 69 on Friday, right at the normal high.

The National Weather Service in Albany said "an upper level disturbance will continue to move east out of the region with a few leftover showers south and east of the immediate capital region as we go into the early afternoon hours. Otherwise it will be blustery [Wednesday]. Tonight a breeze will continue as it clears and turns cold. Sunshine will moderate temperatures on Thursday but the breeze will continue."

Gas for delivery Thursday into the Algonquin Citygates gained 18 cents to $4.79 and parcels on Iroquois Waddington were up by 8 cents to $4.94. Gas on Tennessee Zone 6 200 L gained 15 cents to $4.91.

In the Mid-Atlantic quotes for gas headed to New York City on Transco Zone 6 added 5 cents to $4.40 and parcels on Tetco M-3 Delivery added 2 cents to $4.40.

If analysts figures are correct, a broad trend of limited coal-to-gas switching and lower exports of gas from South Texas may offer a mechanism to increase gas storage. Industry consultant Genscape reports that "In the Southeast and Mid-Atlantic region, two significant trends are taking place this spring: a decrease in demand from power plants due to higher gas prices, also known as a decrease in coal-to-gas switching; and a decrease in imports from South Texas."

Genscape analyst We Chien notes that "Transco Zone 4 prices have continued to trade higher since 2012. Transco Zone 4 averaged $4.54/MMBtu for April -to-date compared to the average of $4.16/MMBtu in April 2013. The increase in price appears to have drove some gas-fired plants off of the generation stack. Southeast demand from power plants has decreased by an average of -0.4 Bcf/d year-on-year for April, about -11% of the sample.

Southeast sample demand from power plants continued to slide lower than the levels of the previous years. Gas consumption by power plants decreased year-on-year in March and April in the Southeast." Genscape bases their conclusions on pipeline nominations and Genscape's own proprietary monitoring. For the power plants that do not have specific gas pipeline delivery points, Genscape utilizes infrared power plant monitoring data combined with known heat rates to estimate gas consumption by the particular units.

"Marcellus production growth continued to push gas back into the producing region. Receipts from South Texas into Southeast decreased to 3.5 Bcf/d for April compared to the average of 5.7 Bcf/d last April. Receipts from South Texas include flows on Transco, TETCO, TGP, Columbia Gulf, and TGT," Chien said.

Futures trading was uneventful as prices were held to a thin 6 cent range and traders jockeyed for position ahead of Thursday's inventory report.

Analysts see short-term weather developments crimping injections. "Prices advanced [Tuesday] to an intraday high of $4.757 amid anxiety that considerably below-cold temperatures (relative to the averages) are forecast to cover a large portion of the nation through almost the first week of May," said Alan Lammey, an analyst at WeatherBELL Analytics. "If these below-average temperatures verify, then it might possibly decrease the quantity of gas being placed into storage in the relative near term," he said in morning comments to clients.

That is a distinct possibility. MDA EarthSat in its morning six- to 10-day outlook shows below and much below normal temperatures east of the Continental Divide all the way to the Eastern Seaboard. "Strong polar ridging that develops during the prior period still appears set to send south a strong late-April cool surge from Canada. While unsettled weather lingers early over the Midcontinent, much-belows are expected to spread southward, reaching into the Deep South by late in the period. The forecast continues to lean on a mix of the American and European models, with the American outlook slightly favored as the Euro appears too strong and long-lasting with the cool air.

"Detail concerns remain in place with regard to timing and intensity due to uncertainty with the upper-level low in play."

Angst continues to grow surrounding the slow pace of storage injections. "The gas market is sitting on pins and needles waiting for the release of the weekly storage report, which will be published [Thursday] by the U.S. government," said Lammey.

"The worry is that the last two weeks of storage data has come in notably below market expectations, putting crucially needed storage injections behind the eight ball during a period of time when the market needs to store as much supply as possible."

Wide variations were forecast for Thursday's Energy Information Administration (EIA) storage report. "...I'm modeling an injection in the area of 54 Bcf to 57 Bcf when the EIA reports its storage data for the week ended April 18. Once again, market gas storage 'injection' expectations are extremely varied, ranging between 40 Bcf and 64 Bcf. This week's storage data will be compared to a 30 Bcf build seen during the same week last year, while the five-year average is a 47 Bcf build," he said.

Others are coming in a bit leaner. A Reuters poll of 21 traders and analysts revealed an average 42 Bcf increase but the range on the sample was wide, from 25 Bcf to 61 Bcf. Kyle Cooper at IAF Advisors in Houston projects a build of 45 Bcf and United ICAP is looking for a build of 35 Bcf.

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