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Christmas Holiday Pushes Cash, Futures Lower, Despite Winter Storm
Despite a decided turn toward more winter-like weather in a number of regions of the United States on Monday, the expected decrease in natural gas demand tied to the Christmas Holiday proved to be enough to send nearly all pricing points lower, with a majority of the declines recorded across the country coming in at more than a dime.
While drops of 10-15 cents were commonplace nationally, the largest single point declines could be found in the Northeast, despite temperatures hovering near or below freezing. Algonquin Citygate lightened its load by 82 cents to $4.78 on Monday for Tuesday and Wednesday delivery, while Tennessee Zn 6 Line 200 declined by 53 cents to $4.64.
Monday’s drop in prices nationally comes in the face of a major snowstorm that is expected to sweep from Oklahoma through the Northeast over the next few days. AccuWeather.com Senior Meteorologist Kristina Pydynowski said “all the ingredients are coming together” for a major snowstorm to unfold Christmas Day and spread from the southern Plains to the eastern Great Lakes and Northeast through Thursday.
“Substantial snow will spread from the panhandles of Oklahoma and Texas to the Red River and western Arkansas on Christmas Day with snow even whitening Dallas in the afternoon, a rare feat for Christmas,” she said. “The major snowstorm will then press northeastward Tuesday night into Thursday, passing from Arkansas into the Ohio Valley, then the eastern Great Lakes and Northeast. The storm has the potential to unleash a half of a foot or more of snow starting Tuesday in southwestern Kansas and Oklahoma. Totals will even top a foot across the interior Northeast.”
Price drops in the West were also notable, with PG&E Citygate declining by 18 cents to $3.67, and SoCal Citygate and the Southern California Border Average each coming off by 13 cents to $3.62 and $3.51, respectively.
While Monday was a federal holiday, and many in the industry took the day off in part, or entirely to extend their Christmas break, trading was actually quite brisk on the day, according to NGI sources.
“Things were pretty weak Monday in the West. I think it was likely because some of the new January forecasts were pretty bearish,” said a West Coast utility trader. “The shocking thing to me on the day was there was quite a bit of business getting done. I was surprised to see how many different companies were trading. Now, they might have been trading from home, but they were still trading. We did a lot of day cash trading…some January prompt stuff.”
She added that bidweek transactions were also taking place. “We did see some bidweek activity,” the trader told NGI. “We did what we needed to do, so we’re done.”
Natural gas futures also jumped aboard the negative trend during the holiday-shortened trading session on Monday. The January contract sliced 10.5 cents on the day to close at $3.346.
Even with natural gas inventories near record highs as North American shale development continues to pump up supplies, government analysts see a meaningful rebound in price coming in the new year. In its Short-Term Energy Outlook released earlier this month (see Daily GPI, Dec. 12), the Energy Information Administration (EIA) said it expects the Henry Hub spot price to average $2.78/MMBtu this year, down from $4.00/MMBtu in 2011. However, the government agency sees a rebound to $3.68/MMBtu in 2013, which marks a 5.4% increase from the $3.49/MMBtu forecast EIA issued in November (see Daily GPI, Nov. 7).
After reaching a weekly record high of 3,923 Bcf in early November, natural gas storage inventories have come back into the stratosphere in recent weeks. As of Dec. 14, storage stood at 3,724 Bcf, which is a mere 66 Bcf higher than last year at this time, but still 345 Bcf above the five-year average of 3,379 Bcf.
“While inventories ended the injection season at a record high, it was due mainly to a high level of gas going into the injection season, rather than strong injection levels,” the EIA said in its Short-Term Energy Outlook. “The increase of 1,446 Bcf in working gas inventory during the 2012 injection season (from the beginning of April through the end of October) is small by historical standards. Last year’s inventory build from April through October, for comparison, was 2,224 Bcf.”
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