Both cash and futures worked their way lower in active trading Tuesday with futures traders almost of the mind that $1-plus futures prices are just around the corner. The physical market saw broad weakness east of the Continental Divide, but cooler weather on the West Coast and additional loads at Northeast points provided notable strong points and quotes finished solidly in the black. At the close of futures trading May had shed 7.6 cents to $2.031 to reach a new set of 10-year low prices and June had dropped 7.1 cents to $2.152. May crude oil tumbled $1.44 to $101.02/bbl.
From Cheyenne to Chicago highly variable but mostly seasonal weather was enough to prompt lower prices by close to a dime at most points. Kevin Roth, meteorologist at Weather.com, forecast that “dry and cool conditions” would occur in most of the regions through Wednesday.
Weather.com forecast the high in Denver Wednesday would reach 74, 13 degrees above normal, but the high in Oklahoma City would be just 65, six degrees below its normal high for this time of the year. Chicago was expected to see a high Wednesday of 52, five degrees off its seasonal norm.
Next-day gas into the Cheyenne Hub cartwheeled lower by close to a dime, and deliveries to Panhandle Eastern lost 8 cents. Gas into NGPL Midcontinent was down 8 cents as well and Northern Natural Demarcation fell a dime.
An eastern marketer noted that prices were higher at Northeast delivery points, but nothing compared to “the ridiculous pricing differential of Nicor to NIPSCO or Nicor to Peoples. It’s just a big 40-cent differential on Nicor compared to what’s going on at some of the other LDCs in the Chicago area.”
A Nicor spokesperson said the flow restrictions causing the high prices were usual and used to manage the company’s storage. “We need to keep the gas coming out of our storage fields for this season. It’s all operational.”
“We are just seeing prices in the $2.60s,” the eastern marketer said. “Our retail load was a little higher than the day before, so it looks like there was a little bit of a [price] driver there. I think the absolute high and absolute low were lower [for Wednesday] than [Tuesday] and add rain to that and it feels pretty cold. I think prices are up a little bit because of that.”
Wednesday gas on Algonquin jumped by close to a quarter and deliveries to Iroquois Waddington added a dime. Gas on Tennessee Zone 6 200 L added a little more than a quarter.
A forecast of cooler and blustery weather on the West Coast helped lift bids for Wednesday delivery. “A storm in the eastern Pacific hurls rain into northern and central California and showers into western Washington and Oregon [Tuesday]. That system continues to move inland Wednesday with rain, showers, thunderstorms and mountain snow expected from the coast to western Montana and western Wyoming,” Roth said.
Quotes on SoCal Citygate deliveries were almost a nickel higher and parcels into the SoCal Border rose by a few cents more. Gas on El Paso South Mainline gained close to a dime.
Market technicians see a major technical stronghold just a few cents lower. “We broke support at $2.04 [Tuesday], which is the last stop before $2,” said Steve Rafferty, analyst with Rafferty Technical Research in New York.
“If the market gets down to $2, there may be some psychological support, but it’s quite possible it will break through. The next major support is at $1.98. The only thing that could possibly stem the tide of selling is an early start to summer, but as of right now we are not seeing it in the New York area.”
Analysts see the futures market in a temporary consolidation with minimal upside potential. “The main feature in this market thus far this week has been a lack of downside follow-through despite the fact that 10-year lows were nicked out by a slight margin early in [Monday’s] trade,” said Jim Ritterbusch of Ritterbusch and Associates.
“This apparent seller exhaustion looks temporary in our view given a lack of fresh fundamental input. The large speculative community appears to be adopting a trading mode in which profits are being accepted at recent exceptionally low levels while fresh shorts are being restricted to occasional price rallies. While we had previously looked for an advance toward the $2.30 area as an opportunity to reestablish a full bearish trading unit, it now appears that a rebound to about $2.20 is the most that can be expected short of an official production cut announcement,” he said in a morning note to clients.
A weather-driven push lower may be difficult to come by in April. Much of the market’s recent decline was encouraged by a super warm March, lowering heating requirements substantially. If forecasts by the National Weather Service (NWS) are correct, the relatively modest heating requirements of April in major energy markets should be less as well, but not by the huge increments experienced in March.
For the week ended April 14, NWS predicts New England will receive 112 heating degree days (HDD), or 36 fewer than normal, and the Mid Atlantic states of New York, New Jersey and Pennsylvania should endure 117 HDD, or 10 below average. The Midwest from Ohio to Wisconsin is forecast to see 114 HDD, or 16 fewer than its normal seasonal tally.
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