Physical natural gas prices continued their volatile ways Wednesday with eastern points continuing higher prompted by pipeline outages and below normal temperatures, while locations west of the Eastern Seaboard were declining. Overall, the national average gain was 95 cents, but taking out volatile eastern points revealed an overall average loss of 8 cents. At the close of trading February futures were 0.4 cent lower at $3.554 and March was down 0.5 cent at $3.553. March crude oil slipped $1.45 to $95.23/bbl.

The brutal burst of winter cold that began to blanket much of the East earlier this week pushed a handful of northeastern natural gas delivery points to record highs on index for a second consecutive day Wednesday, according to NGI data.

Four northeastern points erased all-time record highs set Tuesday with new marks on Wednesday for Thursday delivery. Iroquois Zone 1 gained $13.06 to average $29.94, while Iroquois Waddington added $5.32 to average $25.05. Tennessee Zone 5 200 Line increased by $6.42 to a new high of $19.46 and Tennessee Zone 6 200 Line bumped higher by $10.95 to $31.73.

Points serviced by Transcontinental Gas Pipe Line, or Transco, were especially hard hit following a system-wide operational flow order (OFO). “Transco has experienced below normal temperatures and significant gas demand over most of its market area. Temperatures are forecasted to continue to be below normal for the next several days,” it stated.

“In order to ensure system integrity, manage imbalances on its system and handle within-the-day volatility, effective with the beginning of gas day Thursday, January 24, 2013 Transco is issuing a system-wide Imbalance OFO.” Transco was not specific when the order might be lifted and said affected parties would be notified via its website. The pipeline services customers from South Texas to New York City.

Weather forecasts indicate the flow order may be in place for awhile. Forecaster predicted the high Wednesday in Boston of 19 would only climb to 21 Thursday. By Saturday highs were expected to reach 25, and then climb to 34 on Sunday. The normal high in Boston is 36. New York City’s high of 28 Wednesday was anticipated to hold Thursday then increase to 34 on Saturday and Sunday. The normal high in New York City (NYC) this time of year is 38.

“Gusty west-northwest winds should diminish [Wednesday]…with temperatures falling to 10-15 in NYC metropolitan [areas]…into the single digits most elsewhere,” reported the National Weather Service. A few readings near zero were “possible in the interior valleys north/west…and in the coldest spots of the Long Island Pine barrens. As winds become light…apparent temperatures will be very close to actual air temperatures…until perhaps late [Wednesday] as winds start to increase.”

Next-day gas into New York City on Transco Zone 6 vaulted $13.07 to $35.33, and deliveries on Tetco M-3 surged $2.74 to $11.21. On Dominion deliveries actually fell 12 cents to $3.53, but deliveries to the Algonquin Citygates fetched a $10.18 increase to $31.32

Great Lakes marketers were playing their cards close to the vest. “We didn’t buy so much today, as there may be better opportunities by the weekend,” said a Michigan marketer. He said he paid $3.72 for Thursday deliveries on Michcon and $3.75 for gas on Consumers. “We might buy some gas Thursday, but I think we are looking at more of a buy for the weekend.”

Next-day prices at Great Lakes and Midwest points were more representative of the nation. On Alliance, gas for Thursday delivery fell 11 cents to $3.71, and at the Chicago Citygates gas came in at $3.71, down 16 cents. Michcon gas was at $3.72, 8 cents lower, and parcels on Consumers were off 7 cents to $3.75. At Dawn next-day gas fell 3 cents to $3.79.

Futures traders think the market already has discounted the cold weather. “It may be a case of ‘buy the rumor, sell the fact’,” said Steve Blair with Rafferty Technical Research. “Most of the six- to 10-day forecasts have been predicting this kind of weather for the last week or so; it’s not like this took anybody by surprise. The run-ups we saw last week were in anticipation of this weather.

“We peg minor technical support at the $3.52 level and $3.44. Major support is at $3.40. On the upside resistance is at $3.725-3.73. In the short term there is limited downside action, with a greater chance of a move to the upside. If this cold sustains itself, the market could drive higher.”

Forecasters don’t see sustained cold. MDA Weather Services in its six- to 10-day outlook shows above-normal temperatures south and east of a sinuous line extending from West Texas to northern Illinois to Quebec.

“The forecast has turned warmer again across much of the Midwest, South and East,” stated MDA. “While this warm-up is still expected to be temporary, guidance is in strong agreement on bringing a couple days worth of much above to strong above normal warmth through most of these regions.

“The next round of cold will spill southward out of higher latitudes and into the Midwest by late period, resulting in a highly variable period for places such as Minneapolis, which is on track to shift from much aboves early to sharply belows late. The West will see its coldest conditions at mid period when the East is warmest.” In its 11- to 15-day outlook MDA shows much below normal temperatures from Florida to North Dakota and points east.

One school of thought has it that the market’s Monday excursion to $3.645 marked a near-term top. “With a potential doji star top forming on the daily candlestick chart into $3.572-3.596 (1.618 a=c) resistance, the case for peaking action gained some traction Tuesday,” said United ICAP technical analyst Brian LaRose. “However, the bears have work to do. To suggest $3.645 marked a top, a down day [was] needed Wednesday. But more importantly, to confirm a dump to $2.762-2.678 (“a”=”c”) is underway, $3.177-3.157 must be broken.

INTL FC Stone Vice President Tom Saal in his work with Market Profile expected the market to test Tuesday’s value area at $3.645-3.545. “Eventually” he anticipates a test of $3.303-3.259 and $3.205-3.171.

Traders will get an idea of how great an impact recent cold weather has had on storage with the 10:30 a.m. EST release of inventory data by the Energy Information Administration. Bentek Energy calculates a pull of 179 Bcf, while Citi Futures Perspective analyst Tim Evans calculates a 160 Bcf withdrawal. Last year 162 Bcf was withdrawn and the five-year average is 175 Bcf.

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