Cash prices fell about 8 cents overall on average Wednesday in large part mirroring declines on the screen. No points were higher for Thursday delivery. Although temperatures in major metropolitan markets are expected to fall, they still remain above average. At the close of trading February futures had fallen 10.5 cents to $3.113 and March was down 10.3 cents to $3.131. February crude oil eased 5 cents to $93.10/bbl.
“Right at the heat of trading everything just fell off,” said a Florida utility buyer. “Prices were following the screen. The market opened strong with the Hub about $3.18 and then fell to $3.15. There was nothing too drastic.”
He said the basis of FGT Z3 to the Hub had actually flipped to a slight discount for January. “We’ll be baseloading less for February and these warm winters are problematic; same thing for mild summers. I need volatility to get my deals done.”
Major eastern energy markets were expected to see only modest declines from current temperature readings. AccuWeather.com reported that Wednesday’s 49 degree high in New York would ease to 45 on Thursday and Friday, but the normal high for this time of year is 38. Boston’s high of 46 Wednesday was anticipated also to ease to 45 on Thursday and to 44 on Friday, well above the normal high of 36. In Philadelphia the high Wednesday of 53 was forecast to slide to 49 Thursday and to 47 on Friday; the normal high is 40.
Gulf points for the most part shed less than a dime. Florida Gas Transmission Z3 was $3.15, down 7 cents, and the Henry Hub fell about 7 cents to $3.14. Transco Zone 3 shed 7 cents to $3.12, and Tennessee 500 L was off by 8 cents to $3.13. ANR SE came in at $3.07, off 9 cents and Texas Eastern E LA fell 9 cents to $3.08.
The typically volatile Northeast posted relatively subdued losses on the day. Algonquin Citygates quoted at an average $4.41, down 11 cents, while deliveries to Iroquois Waddington shed 6 cents to $4.08. On Tennessee Zone 6 200 L Thursday deliveries fell 19 cents to $4.35. At eastern metropolitan points, prices slid as well. Tetco M-3 was off 7 cents to $3.32 and deliveries destined for New York City on Transco Zone 6 lost 9 cents to $3.33.
Futures traders see the market still “range trading,” according to a New York floor trader. “It’s going to be a little warmer going into the weekend, so there is nothing fundamental to force the issue higher. I think down in this area is a buying opportunity and until it breaks lower, you have to take a shot at buying in here. Buy it at $3.08-3.11, and if it breaks $3.05, change your mind.”
As weak as the market may seem, market technicians versed in Elliott Wave and retracement analysis see neither a bullish case nor bearish case in play, at least for now.
Wednesday’s decline has put the market close to support levels.
“While Tuesday’s decline was able to further the case for Monday’s candlestick being labeled as a doji star top, key support has yet to be broken,” said United-ICAP analyst Brian LaRose. “And as long as natgas remains above support, we cannot rule out the possibility of bottoming action. Bears need to get below $3.095 to signal further downside is ahead. Bulls need to get back above $3.394 to suggest a bottom is in place.”
Analysts aren’t too optimistic about long-term natural gas prices.
“The only real hope for the bulls at this point is a deep freeze predicted for the East at the end of the month, but that is about it,” said United-ICAP’s Drew Wozniak. With the Energy Information Administration (EIA) on Tuesday “confirming production increases, and mild weather in the consuming region over the next week, the bears are in control.”
Weather forecasts moderated slightly overnight. In its 11- to 15-day outlook, WSI Corp of Andover, MA, said Wednesday’s “forecast is not as cold in the Midwest and Northeast as [Tuesday’s] outlook.” Confidence in the forecast “is near to below average based on fairly good large-scale model agreement but in a transitional pattern.”
Risks to the forecast include temperatures trending “colder across the western U.S. and warmer for the Deep South in future forecasts. Although a negative NAO [North Atlantic Oscillation] phase is anticipated, models indicate that the mean trough and colder weather will gradually shift back to western North America as ridging undergoes retrogression to the Aleutians.”
Expectations are for a hefty draw in Thursday’s EIA inventory report. IAF Advisors analyst Kyle Cooper predicts a pull of 191 Bcf. His figures show that last year 95 Bcf was withdrawn and the five-year average is a 122 Bcf draw. Bentek Energy is looking for a draw of 198 Bcf and an Energy Metro Desk (EMD) survey showed an average 188 Bcf.
EMD editor John Sodergreen hinted that the 10:30 a.m. EST EIA release may show some surprises. “We note that wide ranges are standard fare (for the past several years) throughout December and January. Surprises are also standard fare for this time of year. That is to say, the market and EIA being 5 Bcf or more away from each other.”
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