Cash gas prices fell 8 cents on average Thursday as traders noted a decline in forward-dated contracts and the ongoing sequence of forecast cold weather ended for the moment. Power prices also eased.

The declines were widespread, and most traders elected to get trades made before the onset of the 10:30 EST release of storage data by the Energy Information Administration (EIA). The EIA reported a withdrawal of 171 Bcf, about in line with market expectations, but prices advanced nonetheless. At the close of trading April had advanced 5.2 cents to $3.486 and May was higher by 5.0 cents to $3.531. April crude oil fell 71 cents to $92.05/bbl.

Northeast next-day gas prices moderated as next-day power prices eased, and traders suggested less demand for electric power. “It may be that some power generators are getting rotated around so their need for gas may be less. I was talking to one fellow and he said he may be picked up tomorrow [to burn gas], but he didn’t know,” said a Northeast marketer.

“Market-wise, we are kind of in a lull. I looked at the 14-day forecast and temperatures in the Boston-Hartford, CT, area went up about a degree. It’s above the average, so there are some warmer days in the offing. There’s always the prediction that there will be colder days, but the cooler days they had forecast for the weekend, it doesn’t appear that they will materialize in the Boston area.”

The marketer speculated that high bidweek pricing could have deterred buyers from stepping up and doing their normal volumes at March index. “[Wednesday] basis was $5.30 into the Boston and Algonquin area, so $8.70 gas for the whole month?” he said. “But Algonquin [Thursday] is already trading at $7.65 so it has come off $1 already.”

Temperatures in the area were forecast to slide to more seasonal levels. Forecaster Wunderground.com predicted the high Thursday in Boston of 50 would fall to 41 Friday and 41 on Monday. The normal high in Boston at this time of year is 41. Hartford, CT’s Thursday high of 49 was expected to ease to 43 on Friday and 39 by Monday. Its normal high is 42. In New York City, Thursday’s high of 56 was predicted to ease to 52 on Friday and fall to 43 on Monday. The seasonal high for New York is 45.

The National Weather Service in southeast Massachusetts said “low pressure will organize east of New England tonight and then intensify over the Maritimes Friday. This low will then meander there into early next week. Other than a brief spot shower, the weather pattern will provide southern New England with mainly dry but cool and brisk weather. Next week, a coastal storm will likely impact the Middle Atlantic States but should track well south of New England.”

Although forecast temperatures were expected to drop, next-day power prices throughout the area weakened. IntercontinentalExchange reported that next-day peak power into the New York Independent System Operators Zone G [eastern New York] fell $2.48 to $44.60/MWh, and at the New England Power Pool’s Massachusetts Hub day ahead power fell $4.58 to $55.61/MWh. At PJM West real time peak power rose $1.31 to $38.04/MWh.

Quotes at Algonquin Citygate shed $1.32 to $6.44, and next-day parcels at Iroquois Waddington added 51 cents to $4.52. Deliveries to Tennessee Zone 6 200 L fell $1.36 to $6.33.

Farther south, gas for Friday delivery to Dominion shed about 3 cents to $3.54, and on Tetco M-3 gas was quoted at $3.72, down 5 cents. Gas bound for New York City on Transco Zone 6 added 2 cents to $3.87.

Other market centers also weakened. Chicago Citygate deliveries were seen 2 cents lower at $3.64; gas at the Henry Hub lost a penny to $3.48, and deliveries to El Paso Permian shed about 7 cents to $3.40. At Opal, gas came in at $3.46, 5 cents lower, and at the PG&E Citygates, quotes for Friday parcels were down 4 cents to $3.74.

Futures prices eased somewhat overnight as forecasts warmed. In its six- to 10-day outlook WSI Corp. said, Thursday’s “forecast is warmer over the eastern U.S. than yesterday’s outlook while somewhat colder in the West. Confidence is near to above average in the forecast. Despite the changes made in today’s outlook, there is good large-scale agreement.

“Temperatures may still run warmer than forecast in the Midwest. All models have trended toward stronger eastern U.S. ridge development during mid-late period in a split-flow pattern. Readings may run cooler along the West Coast in association with a deepening trough.”

Addison Armstrong of Tradition Energy saw the market grappling with “the approaching start of spring’s slack demand shoulder season and the record production levels that overhang the market while discounting expectations of a well above-average storage withdrawal.”

The release of government storage data gave traders better insight into what ending-season inventories might be. With four weeks left to go on the traditional heating season, all indications are that the ending inventory will be far less than last year’s plump 2,455 Bcf. The Energy Information Administration in its Short Term Energy Outlook projects a 1,996 ending inventory level.

Analysts were approaching the report with caution. “We have a sneaking suspicion this week is going to be costly for everybody for a variety of reasons. The late-stage weather shift has everybody second guessing everything. Lots of confusion in the market again this week, but it’s clear folks see risk to the high side (bigger pull),” said John Sodergreen, editor of Energy Metro Desk.

Kyle Cooper of IAF Advisors in Houston calculated a 177 Bcf pull, and Tim Evans of Citi Futures Perspective was right on the money with his prediction of a 171 Bcf decline. A Reuters survey of 21 traders and analysts revealed a sample mean of 167 Bcf with a range of 140-179 Bcf, and Bentek Energy predicted a 175 Bcf pull. Last year, 106 Bcf was withdrawn, and the five-year average is for a withdrawal of 118 Bcf.

It may be too early to tell, but bulls may have fired the first warning shot across the bow of a market for the most part captained by the bears. The EIA reported that production in the lower 48 for December was at 72.70 Bcf/d, down 0.83 Bcf/d from November (see related story). One school of thought has it that the declines may be due to shut-ins in places like New Mexico due to cold weather and other operator shut-ins, but the decline could be an initial market response to a gas rig count that has been sliding for years and now languishes at 428, down from 710 a year ago.

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