Physical natural gas prices Wednesday eased a couple of pennies in an overall broad decline. However, if volatile New England points on pipelines such as Iroquois, Algonquin, and portions of Tennessee are factored in, the decline is 27 cents. No more than a handful of locations were able to post gains. At the close of futures trading March had added 7.6 cents to $3.306 and April was up by 7.5 cents to $3.371. March crude oil slipped 50 cents to $97.01/bbl.

In the Northeast, falling power prices contributed to much of the day’s decline. “That’s kind of the way it is set up,” said a New England marketer. “We are wondering why [physical] gas pricing has been so much different in February so far than January. The weather has not been that different so you wonder if there wasn’t any gas coming in, did some power plants go down and more gas got pulled, or was it a combination of things? Was the pipeline selling more capacity? Were there restrictions that occurred?

“I hope the prices come down. It’s harder to do deals when prices get up to $20. People don’t want to part with the money,” he said.

Gas traders were paying more attention to power prices and appeared to be discounting stormy weather expected to impact the eastern United States. “A storm has a chance to take a sharp enough left turn up the East Coast this weekend, perhaps affecting the U.S. and neighboring Canada. The storm would be part of a series of potentially major weather events through the end of February,” said meteorologist Alex Sosnowski.

“[W]ith the way cold air will plunge southward over the Central states this weekend [it] may not only set up a corresponding northward storm track along the Atlantic Seaboard. It could cause the storm to strengthen rapidly as it moves up from the South. It will be a matter of how quickly the storm strengthens to determine if heavy snow is thrown back over the Atlantic Seaboard or falls over Atlantic waters.”

By the end of the week temperatures are expected to be 10 degrees above normal in major cities. predicted that Boston’s high on Wednesday of 41 would ease to 40 Thursday before jumping to 48 on Friday. The seasonal high in Boston is 38. New York City’s high of 43 was forecast to rise to 46 on Thursday and hit 51 on Friday. The normal high in New York this time of year is 41.

Eastern power prices nose-dived. Day-ahead peak power at the New England Power Pool’s Massachusetts Hub tumbled $115.46 to $139.79/MWh and deliveries to the New York Independent System Operator’s Zone G (eastern New York) delivery point fell $32.00 to $73.00/MWh.

At Algonquin Citygate Thursday deliveries fell $9.88 to $17.85 and on Tennessee Zone 6 200 L next-day gas slumped $5.24 to $17.91. On Iroquois Waddington Thursday parcels shed 94 cents to $4.44.

Price declines at points farther south were more muted. Gas on Dominion retreated 2 cents to $3.33, and on Tetco M-3 buyers were able to procure Thursday gas for $3.51, about 8 cents lower. Gas destined for New York City on Transco Zone 6 skidded 29 cents to $6.10.

Declines at Gulf points more closely mirrored changes at most markets. On ANR SE next-day gas was seen at $3.25, down a penny against Tuesday’s pace and at the Henry Hub Thursday, gas was quoted at $3.28, about 2 cents lower. Deliveries to Tennessee 500 L were off by 4 cents to $3.26, and Transco Zone 3 gave up 3 cents to $3.28.

“Prices settled above $3.30 and that is a good sign. It may lead to a higher push Thursday,” said a New York floor trader. “I have a 162 Bcf draw for Thursday’s inventory report. We might see a little action depending on what the number is.”

The trader also noted that this was the beginning of fund rolling. Long March positions by funds such as the U.S. Natural Gas and the Goldman Sachs Commodity Index were beginning to work their way through the market.

One factor that will definitely be making its way through the market Thursday is the 10:30 a.m. EST release of inventory data by the Department of Energy’s (DOE) Energy Information Administration. Last year 113 Bcf were withdrawn and the five-year average is for a 154 Bcf decline. This week’s report is expected to easily surpass both those figures.

IAF Advisors of Houston forecasts a pull of 170 Bcf, and a Reuters poll of 26 traders and analysts revealed an average 162 Bcf with a range of 130 Bcf to 176 Bcf. Industry consultant Bentek Energy is expecting a 165 Bcf withdrawal.

Forecasts have turned a little cooler in the near-term. WSI Corp. in its morning six- to 10-day outlook said, “[Wednesday’s] forecast is colder across the central U.S. than yesterday’s outlook while slightly warmer over the Northeast and along the West Coast. Temperatures may run colder than forecast across most of the country, perhaps aside from the Northeast corridor and immediate West Coast regions, downstream of a strong Eastern Pacific through Alaskan Gulf blocking ridge.”

Tim Evans of Citi Futures Perspective suggests standing aside the natural gas market until a low-risk entry point can be identified. He saw Tuesday’s action as little more than the market idling “quietly within its recent trading range…on updated weather forecasts that were milder in the near term, but colder 11-15 days out compared with Monday’s outlook.

“The market is also trying to get a handle on what Thursday’s DOE storage report may show, with our small and unscientific sampling of market estimates suggesting the consensus may be comparable or slightly more than our model’s 161 Bcf estimate. That would be a modestly supportive result compared with the 153 Bcf five-year average benchmark.

Evans’ figures show that by March 1 the year-on-five-year surplus will recede to 290 Bcf from the current 351 Bcf level.

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