Unity in price direction returned to the cash market Monday as all points rose in response to somewhat colder-than-expected weather forecasts and the previous Wednesday’s 17.3-cent advance by January futures. Last Wednesday’s report of a 147 Bcf storage withdrawal for the week ending Dec. 19, which exceeded consensus expectations, and the restoration of industrial load following a long holiday weekend added to cash bullishness Monday.
Sumas, up about a nickel, was the only point failing to register double-digit gains that ran as high as about 75 cents. The Southwest and Southern California markets, where some supply shortfall issues were showing up on El Paso, tended to see most of the largest increases.
Nymex traders continued to provide strong support for the next-day cash market by sending January natural gas to expiration Monday with a spike of 31 cents (see related story).
In its six- to 10-day forecast posted last Tuesday for the Dec. 29-Jan. 2 period, the National Weather Service had predicted above-normal temperatures for much of the eastern three-fourths of the U.S. (see Daily GPI, Dec. 24). However, it appears that the “normal” forecast for the Northeast and much of the northern Midwest (including some below-normal expectations along the Midwest’s Canadian border) included sufficient heating load to help boost prices in other areas such as the Gulf Coast.
Snowfall will be relatively light Tuesday in the upper levels of the Northeast, but gusty winds will result in “biting wind chills,” The Weather Channel (TWC) said, and that will be followed Wednesday by a storm coming eastward from the Midwest that will bring heavier amounts of snow. However, only interior sections of the Northeast and upper New England are likely to have sub-freezing lows.
Lows in the teens and 20s will be common again Tuesday from the Midwest through the Upper Plains to the Rockies.
Following a chilly holiday weekend, the South will be unseasonably mild Tuesday, according to TWC. However, a cold front will begin taking temperatures lower that afternoon in Oklahoma and Arkansas, the forecasting service added.
El Paso had a Strained Operating Condition due to low linepack in effect since Sunday and said it was encountering underperformance issues at receipt points in San Juan Basin and to a lesser extent in Permian Basin (see Transportation Notes).
A Gulf Coast producer said it seemed to be colder than expected this week, “but not that much” colder. However, “this weather is just unbelievable,” he added, saying utility buyers were telling him that wide temperature variances “were wreaking havoc on their sendouts.” It seemed that it would be cold one day, moderate the next day, and then back to cold, he said. Storage use doesn’t seem to be very heavy right now, he said, or otherwise people wouldn’t be buying so much spot gas Monday.
The producer said his company finished bidweek trading Monday, and for his part he did only one January deal that day — a TGT Zone SL sale at basis of minus 1.5 cents. There may have been more activity with other traders Monday, he said, but most of the utilities with which his company deals wrapped up their January purchases before Christmas.
Monday’s screen strength may help keep prices going higher elsewhere Tuesday, a Midcontinent producer said, but he is expecting lower quotes in his region because of tight takeaway capacity. It looks like the Midcontinent pipes are getting overstuffed again, as they often have been in the last couple of months, he said. His company was having nominations being cut Monday and anticipated more of the same Tuesday, he said.
The producer said he was surprised to see the market as strong as it was Monday because weather-based load did not appear to be heavy enough to support the sizeable gains. Even with last week’s report of an above-expectations storage pull, “there’s still plenty of supplies in the ground,” he added.
The expiration-day futures spike gave a boost to post-Christmas bidweek numbers, the producer continued. He reported selling NGPL-TexOk packages Monday at $5.42 and $5.44. That was considerably higher than the $4.96-97 level at which TexOk began before Christmas, he said, adding that he was being told that as of Monday the point looked like it had a $5.10 average so far. He didn’t do any deals there himself, but said he saw CenterPoint-East trading mostly $4.55-57 Monday, with the day’s last deal having gotten as high as $4.69. Again, it was a case of bidweek prices rising because of Nymex strength, he said.
The number of drilling rigs searching for natural gas in the U.S. continued to fall by 19 to 1,347 in the week ending Dec. 26, according to the Baker Hughes Rotary Rig Count (https://intelligencepress.com/features/bakerhughes/). All of the decline occurred onshore as there was no change in the Gulf of Mexico tally, Baker Hughes said. Its latest count was down 7% both from a month ago and the year-earlier level.
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