Cash prices overall averaged a 20-cent drop Friday as weather forecasts called for moderation in the Northeast and marketers cited an abundance of available gas. Rockies, the Midwest and the Gulf Coast were all lower. At the close of trading, December futures had dropped 10.5 cents to $3.503 and January was off by 10.3 cents to $3.634. December crude oil gained 98 cents to $86.07/bbl.
Rockies traders discounted the effects of a weekend storm expected to pummel the western United States and slide to the east over the weekend. According to Wunderground.com, the high temperature in Colorado Springs Friday of 72 was forecast to fall to 55 on Saturday and 32 on Sunday. Kansas City’s high of 76 on Friday was anticipated to slide to 61 on Sunday and 45 on Monday.
“I don’t think there is any shortage of gas in storage,” said a Rockies producer. “I think the day’s decline is more due to the fact that everyone is worried it’s going to warm up real fast back east, and I think they are talking 60s in New York City next week.”
AccuWeather.com meteorologist Alex Sosnowski on Friday said, “In the wake of a strong front, and in some areas severe weather temperatures will take the plunge this weekend over the Plains. As a powerful storm tracks across the Canada border this weekend, a strong cold front will blast eastward across the Plains and into the Mississippi Valley.
“Ahead of the front, temperatures are surging to record-challenging levels, reaching the 70s and 80s. In most areas, Saturday will be the warmer of the two days this weekend. Meanwhile, soon after the frontal passage, temperatures will crash 10, 20, 30 and even 40 degrees. In some cases, huge temperature drops can occur in a matter of hours and even minutes. By Sunday evening, the leading edge of the colder air will reach the lower Mississippi and the Ohio valleys to the central Great Lakes. The warmth will be squeezed to the East Coast.
“The cold air will not lock on to the region [this] week. It appears the core of the arctic air will lift northward as the week progresses.”
The Rockies producer said he thought that the differential should stay narrow between Rockies prices and the Henry Hub. “It always gets real narrow when we get cold weather and it warms up back east. To a certain extent, Henry will drive Rockies [pricing], but that is probably less important than the Midwestern markets and what is happening in California. The two Songs [San Onofre Nuclear Generating Station] plants are still down.”
In spite of a 19-cent decline at Opal, both Opal and the Henry Hub traded weekend and Monday gas even at $3.33.
“I don’t know why this market is so weak. They have had pretty good weather [cold] back in Chicago, and I think Illinois uses more gas for heating than New York does, which is a big heating oil market,” the producer said.
Quotes at the Cheyenne Hub skidded 14 cents to average $3.29, and deals on CIG were done at $3.24, 8 cents lower. Weekend and Monday gas at Opal traded 19 cents lower at $3.33, and deliveries to Northwest Pipeline Wyoming were off 19 cents to $3.28. Gas on Questar skidded 16 cents to $3.25.
Midcontinent and Midwest points didn’t quite suffer the same declines as the Rockies. Gas at the Chicago Citygates was down by 8 cents to average $3.54, and deliveries on Alliance were 5 cents lower at $3.57. On NGPL Mid-Continent Pool, quotes were down 8 cents to $3.27, and on Oklahoma Gas Transmission weekend and Monday gas changed hands at $3.18, unchanged. On Panhandle Eastern buyers found gas 11 cents lower at $3.18.
Double-digit losses were the rule at most Gulf points. ANR SE was seen averaging $3.24, off 13 cents, and on Columbia Gulf Mainline gas was quoted at $3.24 also, 14 cents lower. At the Henry Hub, Monday deliveries came in at $3.33, off 12 cents, and on Tennessee 500 L prices fell 14 cents to $3.30. Parcels on Tetco E LA were off by 8 cents to $3.25.
Futures traders were not miffed by the day’s 10-cent drop. “I think we will find some support around the $3.45 to $3.50 level and take another shot to the upside,” said a New York floor trader. “It’s supposed to be 65 on Sunday and Monday. Right after I got my power back on.”
Near-term weather forecasts are not calling for a return to 2011 conditions, but models are showing pervasive above-normal temperatures. Commodity Weather Group in its 11- to 15-day outlook shows above-normal temperatures stretching from Idaho to western New York and as far south as Missouri. “The final half of November 2011 featured a very warm pattern over nearly the entire U.S., which was fueled by a strong Gulf of Alaska (GOA) low and a very positive North Atlantic Oscillation (+NAO),” said Matt Rogers, president of the firm in its morning energy forecast.
“While we are currently losing many of the blocking features that drove sporadic cool to cold pushes this autumn, we still do not see a full-fledged return to the prevailing 2011 pattern type. The models continue to be reluctant to build a strong, dominant GOA low situation and the North Atlantic continues to fluctuate between marginally positive and marginally negative for the NAO. The result — as our six-15 day shows today — is a warm-leaning pattern that is still cooler than last year. The East Coast and South run the risk of seeing some storm-induced variability, limiting warmer temperature risks.”
The forecast warmth in the 11- to 15 day period doesn’t seem to have much of a bearish impact for now. “This market has become trapped in a relatively tight 10-cent range this week as short-term supply/usage items appear balanced for now,” said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients.
“The bulls can latch onto the fact that the contraction in the year over year storage surplus remains ongoing with the supply excess likely to be eliminated by early next month. The bears, on the other hand, can note a record-high storage level of about 3.93 Tcf that is exceeding five-year averages by a substantial 244 Bcf, a difference of 6.6%. Obviously, the storage congestion element that had been a bearish consideration in this market last summer is not going to materialize, and as a result, long-standing short position holders remain anxious to exit the short side on further price declines. Although a technical bearish case was fortified via the sharp price drop of a week ago, lack of significant downside price follow-through will be testing the patience of the bears if fresh multi-week lows are not presented within the next two to three trading sessions.”
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