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Cash Catches Up to Weak Futures; Most Points Show Double-Digit Losses
All cash points retreated Tuesday with most sliding in double-digits as the physical market caught up with Monday’s late-session slide in futures and adjusted for continued weather moderation for much of March.
Rocky Mountain points were particularly weak, dropping by 20 cents in some instances, but some eastern points were able to keep losses close to a nickel. At the close of futures trading April had dropped 8.4 cents to $2.519 and May had slid 8.5 cents to $2.627. April crude oil plunged $2.01 to $106.55/bbl.
An eastern marketer commented that “the first part of the month [March] is warm in the Northeast for sure, but it all depends on demand. There is always cooler weather that pops up here and there, but there is plenty of gas to pull from storage.
“A lot of the market opportunities result from people pulling down storage gas to sell into the spot market when a cold snap hits, but there weren’t too many of those times this winter. You won’t have a lot of people waiting around for April and May to re-inject gas. There will be a different set-up this year.”
Declines nationwide averaged 12 cents, but eastern points were relatively strong, showing more modest losses. Gas into the Algonquin Citygate and Dracut was lower by about a nickel, and deliveries to Tennessee Zone 6 200 L and Iroquois Waddington dropped slightly less than a dime. Tennessee Zone 6 300 L was unchanged.
Forecasters are calling for blizzard-like conditions to pummel the Northeast. “The same storm delivering a Leap Day blizzard to portions of the northern Plains and the Upper Midwest will push snow, ice and rain into the Northeast beginning Wednesday,” said AccuWeather.com meteorologist Alex Sosnowski.
“During Wednesday morning, a wintry mix will break out across western and central upstate New York, part of southern Ontario and portions of central Pennsylvania. The wintry mix will constitute not only areas of snow and rain, but also areas of some sleet and freezing rain.”
Weakening prices were music to the ears of gas buyers as bidweek winds down. “Our delivery point price is $2.446. Plus we pay a basis on Consumers of 17.5 cents and the basis on Michcon is 18 cents, so we are looking quite a bit down from last month,” said a Great Lakes gas buyer. “It’s moving in the right direction, and with the warm weather, I’m getting used to not having snow.”
Declines at Great Lakes points were closer to the average decline nationwide. Chicago Citygate was quoted almost 15 cents lower, and both Consumers and MichCon saw declines of just more than a dime.
Futures traders described the day’s decline as “orderly.” “We’ve been trading down about 6 to 9 cents for the last several days, so this is nothing out of the ordinary,” said a New York floor trader. He added that $2.50 was “still a good [support] number, since we traded down to $2.5110 and it held. Traders are still talking a $1 handle, but who is to know.”
Tuesday’s weak close has market technicians looking another 10 cents lower. “Did Monday’s $2.435 low mark the end of an ABC B wave correction down from $2.733?” queried Brian LaRose, analyst with United-ICAP prior to the open. “To confirm this is the case $2.619-2.669 must be exceeded. Clear this narrow band of resistance and a push to $3.048 minimum would be anticipated. Sink below $2.554 before $2.619-2.669 can be exceeded in the April contract, [and] expect a retest of 2.421 support before any chance at bottoming.”
Forecasters are calling for a very warm March. Commodity Weather Group in its morning six- to 10-day outlook shows above-normal temperatures extending east of a gentle arc from New Mexico to Wyoming to North Dakota. The broad swath of warm temperatures is bordered on the south and east by a line from Alabama to North Carolina.
Changes in the European ensemble weather model have returned an “originally scheduled programming of strong warming for the Midwest and East that is expected to dominate much of March,” said Matt Rogers, president of the firm. “The upcoming weekend cool push is drifting into the one- to five-day [forecast]. Both reasons helped justify considerably warmer forecast shifts in the six- to 15-day forecast window. This adjustment leads the West back toward an overall cooler-to-colder forecast with the coldest anomalies in the interior toward the Pacific Northwest. Texas could see some variability at times but should lean to the warm side overall, too.”
Analysts suggest that additional downside may be limited. “It is becoming increasingly apparent that the production shut-ins that have been announced thus far combined with an uptick in power demand related to coal to gas substitution are beginning to back some pricing punch,” said Jim Ritterbusch of Ritterbusch and Associates. “Although these items don’t appear capable of forcing a sustainable price advance, they appear to have placed a floor under this market well above last month’s nearest futures lows at the $2.23 area. So while it remains easier to construct a bearish rather than a bullish case for this market, we are also forced to concede to some ongoing shifts in the balances that could keep this market trapped within this month’s trading range for some time.”
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