Forecasts of a Midwest plunge into frigid conditions again after a brief warming trend, along with colder temperatures forecast for the eastern South, kept the cash price rally that had begun Monday going at a large majority of points. Monday’s gain of 10.1 cents by February futures also contributed to the overall firmness of the physical market.
Although the Northeast can expect a stormy Wednesday with plenty of frozen precipitation due in the Northeast, regional citygates saw nearly all of Tuesday’s declines of about a dime to nearly 30 cents, largely because temperatures will be mostly unchanged in New England and higher at more southerly Northeast locations such as New York City and Philadelphia. Sumas, which recorded the day’s smallest loss, was the only softer point outside the Northeast.
Otherwise, quotes ranged from flat to about 60 cents higher. All but three of the rising points had double-digit gains.
Wednesday’s cash trading will have moderately negative prior-day futures guidance after the February natural gas contract gave back most of Monday’s uptick with a loss of 8.9 cents Tuesday (see related story).
The Midwest has a plethora of lows in the lower teens predicted for Wednesday. Minneapolis and some cities near the Canadian border are due to bottom out around zero or less.
The western end of the South was starting to see sunshine and rising temperatures Tuesday following the passage of a wet cold front. However, the front was moving eastward, which meant a return of significant heating load in the region’s eastern half Wednesday before the front moves out to sea that evening.
The Rockies saw solid gains despite a warming trend getting under way Wednesday in the southern section of the region, with Denver’s high expected to soar to the high 50s from around 43 Tuesday. However, heavy snows are expected in the northern Rockies and eastern Pacific Northwest. The rest of the West will tend to range from cool to merely chilly.
After saying linepack had returned to normal systemwide Monday, Kern River reported Tuesday that linepack was low in the two farthest downstream of its four segments.
Withdrawals from the storage facilities of Southern Natural Gas are proceeding at a significantly quicker pace than in the last two heating seasons. The pipeline, which has 60 Bcf of working gas capacity, said inventories stood at 43.2 Bcf, or 72% of capacity, as of Jan. 1. That compares with 46.4 Bcf (77%) on Jan. 3, 2008 and 55.1 Bcf (92%) on Jan. 4, 2007, Southern reported.
A Gulf Coast producer considered it a tough call on Wednesday’s price direction. He said he had a slight leaning toward softer because of Tuesday’s screen decline, but said that might be counterbalanced because it looks like there will still be ample heating load in the northern market areas, especially in the Midwest.
A Midwest producer cited the same reasons for being unsure about where prices will go. Cash market activity still seems quiet, he said, even with more traders back in their offices after the holidays. The main problem with the Midcontinent market currently, he said, is a longstanding one: finding available takeaway transportation to the market area. There is little local load in the Midcontinent because of moderate weather, he added.
For some reason “many of our neighbors seem to be bullish” about prices, but his company is still bearish, the producer said. He reported not hearing much talk about last week’s huge drop of 80 rigs drilling for gas (https://intelligencepress.com/features/bakerhughes/). That might start having some bullish impact around the middle of the year, he said, but does nothing for the price of gas tomorrow.
The producer said it’s interesting to hear Kinder Morgan talk about possibly initiating backhauls from the Rockies Express (REX) interconnect with NGPL to NGPL’s TexOk zone (Kinder Morgan is the operator of both pipelines). Most people might think it’s more logical to take REX gas toward the Midwest, he said, but added that he had seen a few instances in the past when a backhaul into TexOk would have been useful. The backhaul service might begin in the second half of this year, he said.
A utility buyer in the South said he didn’t have time to talk Tuesday afternoon because he was making an intraday purchase. The utility didn’t really need the gas itself, he said, but was trying to help someone who apparently overbought and had no place to put the excess supply.
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