A run of rising prices was extended into its fourth day Thursday, but there were mixed feelings on whether the streak can be sustained any further. The latest gains ranged from about a dime to nearly half a dollar.
The strong first two days of the April aftermarket have put major space between swing numbers and first-of-month indexes. Here are some examples (index prices in parentheses): Chicago citygates just under $5.90 ($5.41); Henry Hub in the low to mid $5.80s ($5.37); Transco Zone 6-NYC around $6.50 ($5.88); and Southern California border in the low $5.40s ($4.87).
Many of Thursday’s larger upticks occurred in the Rockies, which had seen the weakest price movement the day before. A storm system moving southeastward from the Pacific Northwest is bringing snow and cold rain into the Rockies and cooling off much of the West in general — a major turnabout for a region that had been setting daily high temperature records only a week earlier.
The Energy Information Administration estimated that a mere 18 Bcf was withdrawn from storage during the week ending March 26. Once again it was the East region that did all the actual withdrawing (33 Bcf), while the West and Producing regions recorded builds of 7 Bcf and 8 Bcf, respectively.
The storage pull was a bit lower than many prior expectations, but seemed to have little effect at Nymex, where May gas futures gyrated both down and up soon after the report but then stayed only slightly in the red through midday. Those who may have interpreted Wednesday’s screen move higher while crude oil weakened as the start of a new disconnect between prices of the two products must reassess now, because the gas contract’s eventual loss of 16.8 cents on the day was attributed almost entirely to a plunge just shy of a dollar and a half for May crude. The big crude drop was attributed in turn to reports that the Bush administration is considering waivers on requiring special blends of gasoline for the summer season, which would allow refiners to produce greater supplies of garden-variety gasoline.
A Northeast trader said it was hard to believe prices managed to move even higher, but he couldn’t see the market firmness lasting much longer. Heading into the weekend and its usual dropoff in industrial load, prices could start to retreat as early as Friday, he said, adding that weather fundamentals are not very good right now. “There’s maybe a little [price] support in the six-to-10-day forecast, but otherwise I can’t find any.”
A utility buyer in the Lower Midwest also said he wouldn’t be surprised if prices fell a little bit Friday. Besides the weekend demand slump, he cited the negative influence of a “kind of bearish storage report today.” In addition, the weather is “fine” in his city.
But “I have no idea” was a Canadian producer’s response when asked how much longer she expected prices to stay firm. She said that even though some in the Midwest and Northeast may argue that their weather is fairly moderate right now, “it must be cold enough for some heating load because the demand is there.” (Much of the two regions was recording lows in the 30s Thursday). She noted that Calgary was getting a few snow flurries Thursday, but said it should warm up next week.
“Cash in the new month is starting out strong,” said a Gulf Coast trader who lives in the Northeast. “The [May futures] contract came off, but swing gas is up. Spreads from the Gulf to market are widening. Gas that was shut off is now flowing. Once the temperatures in the Northeast warm up, as they are expected to do in about a week, there will be a substantial correction.” But for now it is rainy and cold in much of the Northeast and demand is up, he added.
The trader noted that his company is doing what he called “a little cross training for a couple of months. I used to be in the market area but now I’m working production [area]. When I was doing Northeast deals, I only had a long-haul perspective of the Gulf. Now that I’m getting better acquainted with the various relations of points, I should be capable of understanding the market in its entire process as well as cover for other traders when they are out.”
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