Cash natural gas prices skidded about 4 cents Thursday as traders made sure they got their deals done prior to the release of storage data by the Energy Information Administration (EIA).
The decline was widespread, and most points in the Midwest and at major trading centers fell anywhere from a penny to a nickel. A few locations recorded losses of a dime or more. The EIA reported an increase in natural gas inventories of 43 Bcf, much greater than expected, and futures prices cartwheeled lower immediately following the report’s release. The selling was relentless and continued throughout the session. At the close, June had dropped 30.1 cents to $4.025 and July was down 30.2 cents to $4.077. June crude oil jumped a hefty $2.96 to $93.99/bbl.
A Midwest buyer said, “we’re done by the time that number comes out, but prices [NNG] were backing off quite a bit. It seems like there is a lot more information out there than I have about what is going on.”
With the sharp decline in June futures, the buyer is virtually assured of much lower quotes for weekend and Monday purchases. “Northern Natural trades about flat to the Hub, [but] it’s one of those crazy weekends where you have one day that is kind of cold and you need more gas and the rest of the days you don’t. You have to try and figure out a way that you don’t have to use storage. Northern discourages storage activity during May and charges penalties for storage use.”
The buyer said at this time of year his company preferred to use baseload gas along with spot purchases as needed, but “we have been selling triple our normal load Wednesday, Thursday and Friday. When your baseload goes away at the first of the month and you triple your load, it’s hard to make it up without using some storage.
“We have had two good months in a row, and April was about 30% higher than budgeted volumes. It’s unusual because it has been so cold and we have been buying quantities similar to winter days and it is spring. On Wednesday we sold 117,000 Dth and Thursday we are expecting to sell a little bit more, about 120,000 to 125,000 Dth and then Friday down to about 117,000. Our normal load for this time of year is in the 40,000 Dth range,” he said.
On Alliance, Friday deliveries eased 5 cents to $4.40, and on Northern Natural Ventura, next-day gas slid 6 cents to $4.33. Deliveries to Demarcation were flat at $4.36, and at the Chicago Citygates packages were seen at $4.41, 2 pennies lower.
Prices at eastern points eased as temperatures were forecast to be slightly below to slightly above seasonal norms. Forecaster Wunderground.com said Thursday’s high in Boston of 68 would slide to 59 on Friday before reaching 64 on Monday. The normal high in Boston is 62. In Philadelphia the high Thursday of 70 was forecast to ease to 64 on Friday and 63 Monday. The normal high in Philadelphia this time of year is 68. In Baltimore Thursday’s high of 70 was anticipated to fall to 64 Friday and climb to 66 on Monday. The normal high in Baltimore is 70.
Gas on Dominion eased 2 cents to $4.27, and gas bound for New York City on Transco Zone 6 skidded 9 cents to $4.40. Deliveries on Tetco M-3 fell 4 cents to $4.40.
Prices at major market points fell a few pennies. At the Henry Hub, next-day gas was down 2 pennies to $4.28, and on Panhandle Eastern Friday deliveries were off 2 cents to $4.13. Gas delivered to El Paso Bonded dropped 3 cents to $4.12, and at the SoCal Citygates next-day gas dropped a couple of pennies to $4.51.
Futures traders suggested that with the big loss, there was likely to be further declines ahead. “With the kind of move you had [Thursday] you’ve got $4.00 as a [support] number, and maybe you see some more people get flushed out if it gets below $4.00,” said a New York floor trader. “In the next week you could see it down to $3.80.”
In his view, moves like Thursday’s often took more than one day to complete. “With such a big move maybe Friday it holds between $4 and $4.07, but once you get into next week, I think you’ll see a push below $4.”
EIA reported total Lower 48 stocks of 1,777 Bcf for the week ending April 26, up 43 Bcf from a week earlier but less than the five-year average of 1,895 Bcf and far less than the 2,572 Bcf EIA reported a year ago.
Before the release of the EIA number, Mike Fitzpatrick of the Kilduff Report told Energy Metro Desk that “Wednesday’s decline was some moderate profit-taking, but he fully expected that if Thursday’s inventory report comes in on the bullish side of his 29 Bcf forecast, prices could advance another 20 cents or more. Wishful thinking.”
Other estimates were slightly higher than Fitzpatrick’s 29 Bcf forecast but well off the reported build of 43 Bcf. IAF Advisors in Houston was looking for a 32 Bcf increase, and Bentek Energy, using its North American flow model, calculated a 31 Bcf build. A Reuters poll of 19 traders and analysts revealed a sample mean of 28 Bcf with a range of 22-35 Bcf. Last year, 31 Bcf was injected and the five-year average stands at 67 Bcf.
Addison Armstrong of Tradition Energy hinted at a market ready to decline when he pointed out that when June futures reached $4.44 Wednesday, sellers were quick to pounce. “Although gas prices pushed to a new 21.5-month high at $4.444 early yesterday, profit-taking emerged late in the session, erasing the day’s gains as traders eyed the coming weeks of slack demand and the end of spring nuclear power plant maintenance.”
Matt Rogers, president of Commodity Weather Group, sees something of a truncated near-term weather outlook. “While not quite as hot as we expected yesterday, Southern California is still expected to see low-to-mid 90s today and tomorrow in many spots. Also, a powerful cool push is still aiming for Texas with record low temperatures (daily and monthly) over the next one to two days.”
The Producing region salt cavern storage figure increased by 11 Bcf from the previous week to 198 Bcf, while the non-salt cavern figure rose by 10 Bcf to 536 Bcf, EIA said. The EIA first split Producing Region facility types in storage report footnotes in March 2012 in an effort to provide more comprehensive information on the relationship between inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
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