More than one trader was surprised to see cash prices generally holding firm Thursday, defying the greater than usual industrial load slump associated with a three-day holiday weekend. Forecasts of a cold front bringing winter-like chills again to the central U.S. and the strength of energy futures Wednesday and Thursday were cited as the chief reasons in the continued rally at most non-western points.
Flat to moderately lower numbers in the West constituted the most significant departure from the overall increases, but there were scattered flat points in the East too. As on the day before, most gains were fairly small at around a dime or less. But the Midcontinent/Midwest — the market facing the most immediate impact of a polar air mass invading from Canada — saw the most upticks of a dime or more, with the demarcation and Ventura points on the Northern Natural Gas system topping all other price movement by rising nearly 20 cents.
“All we can think of is that cash gas must be tracking the oil futures spikes,” said a Midcontinent/Southwest marketer when asked about the cash uprising. (Nymex’s May crude oil contract, up more than a dollar Wednesday, nearly duplicated the feat Thursday by soaring 99 cents to $37.14/bbl in pre-weekend short-covering prompted by further fierce fighting in Iraq, a refinery explosion in New Mexico and the government’s Wednesday report of an unexpected inventory drop among oil-based products.)
But there’s also a bit of weather support, the marketer went on. The cold front that was just beginning to move in the Upper Midwest and Upper Plains as the weekend began was expected to lower temperatures to around 30 degrees as far south as North Texas by Sunday night, she said.
A Northeast trader could see “no obvious reasons” for moderately stronger prices Thursday. He discounted weather as a major price mover, although the central U.S. front was expected to spread eastward as well as southward. He did allow that Wednesday’s energy futures surges may have provided a support base for Thursday’s cash gains. He could detect no “extra” gas buying from LDCs or power generators in the Northeast, but said they have continued to buy steadily. “Still, I would have expected prices to go down for a long weekend.”
Coming as it did after most cash deals had been completed by traders wanting to leave early for the holiday weekend, the weekly storage report had virtually no influence on the physical market. The Energy Information Administration finally reported its first all-around storage injection of the season, even though the Producing and West regions had already recorded net builds during March. This time the East region contributed a 3 Bcf injection to the Producing and West figures of 15 Bcf and 2 Bcf respectively for a total U.S. build of 20 Bcf for the week ending April 2. The screen rose afterward to a daily gain of 6.9 cents, but it was likely due more to riding the coattails of a further surge in crude oil futures than a response to the storage report.
A Florida utility buyer reported “no problem” with Florida Gas Transmission’s extension of an Overage Alert Day notice — the only significant OFO-like constraint on a major pipeline going into the weekend — through at least Thursday. Because FGT doesn’t announce OFO-like constraints until the morning they’re implemented (unlike the day-ahead notices by other pipes), “we sometimes have to make intraday purchases or sales as necessary to adjust nominations,” the buyer said. But with an imbalance tolerance as loose as 15% in last week’s OAD, it’s not necessary all that often, she added. Florida was getting a little hotter last week, but could expect some cooling rains over the weekend, she said.
Rockies price declines ranging to a little over a nickel occurred despite The Weather Channel’s forecast that “very chilly air will drop southward from the Rockies eastward with temperatures 5 to 20 degrees below average over the weekend. High temperatures may fail to reach 40 in Denver on Saturday.”
The calendar says spring has arrived, but Weather 2000 believes the final two weeks of “winter” are going out with a bang, with the central U.S. bracing for early March-like cold. In its advisory Thursday, the New York City-based consulting firm said the next “powerful surge of moderated polar air will impact the central U.S. with extremely unseasonably cool air for this time of year, and then sweep into the eastern third of the nation. The next [one to 10] days will probably feature the last wave(s) of winter-like readings and multi-regional double-digit cool anomalies…
“Temperatures across several central states could easily swing 20-40 degrees cooler in the short term, and then right back again beyond 10 days! It’s physically impossible for the atmosphere to turn on a dime, but as rapid and tumultuous of a transition from winter to summer as you can have will be witnessed over the coming month. It’s a very rare event to go from [three to four] months of excessive HDD [heating degree day] accumulations almost immediately into [three to four] months of excessive CDD [cooling degree day] accumulations; we’re talking not in decades here. But the nonchalant writing off of the final stages of winter, combined with the casual view of a temperate/cool/seasonable summer by most climate models and forecasters, is in our view setting up an alarming situation that can and will catch many industries off guard.”
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