Except for a smidgen of flatness at two Northwest Pipeline points, prices increased across the board Thursday as freezing temperatures — in some places approaching zero degrees — threatened to spread from the already frigid Midwest into the Northeast and to a limited extent into parts of the South.
Although gains went as high as about half a dollar at Northeast citygates, a majority were fairly moderate at around 20 cents or less. Several were in single digits, with the Rockies tending to record most of the smallest upticks.
In addition to the spread of heating load, cash prices will get extra support Friday from a screen rise of just over half a dollar. At least one source was dubious about how bullishly Nymex traders reacted to the Energy Information Administration’s estimate of an 88 Bcf storage withdrawal for the week ending Jan. 7. The volume was within a large range of prior expectations but towards the lower end of them. But the source did acknowledge that the high level of short positions in the natural gas pit has been a hot topic of discussion recently and said they must have felt it was time to cover their positions. Also, a spike in February crude oil futures to just over $48/bbl due to continuing supply worries probably had something to do with the large natural gas rise, he said.
Although winter weather was getting pretty harsh in the northern U.S., it didn’t mean much to a Calgary-based producer who reported a low of minus 29 degrees F. in the city for Thursday. Conditions are due to start warming up a little this weekend, he added; of course, “warming up” is quite relative when one gets that cold!
The producer, who trades Chicago, said the citygate was up only about a dime because heavy storage withdrawals were keeping the demand for new supplies down. However, he expects “a big pop” higher Friday because of spikes in energy futures Thursday and “even colder temps” being predicted for the Midwest this weekend. “I look for the citygate to try to match the February futures level Friday,” he said, noting that the screen had continued higher to $6.60 in Access activity Wednesday afternoon. That would represent a Chicago advance of about 50 cents Friday.
Although Midcontinent/Midwest numbers saw mostly modest increases, traders in those markets likely had their hands full in coping with rising degrees of restriction on pipelines serving the Midwest (see Transportation Notes).
A Dallas-based marketer, noting that area temperatures were only sinking into the low to mid 50s through the weekend, said that was not nearly as cold as had been predicted earlier in the week, which helped explain the somewhat tepid price reaction to the major bout of cold weather moving into market areas to the north.
A Northeast trader commented that his area had gotten a little delay in its onset, “but the cold is coming Friday.” Intense cold is expected to hang around in the Northeast through about the middle of next week before the region sees any significant warm-up, he said. Definitely, prices will keep going up for the weekend, he added, largely due to heating loads expected to stay large for nearly a week, with Thursday’s big energy futures gains adding further impetus to cash price strength.
One source told NGI that because of narrow basis differentials, pipeline capacity between the Rockies and Midcontinent is being substantially underutilized (see related story). He attributed the strengthening of Rockies prices to near-parity with Midcontinent points to major additions of Rockies pipeline takeaway capacity in the last couple of years. Cheyenne Plains, Trailblazer, Kinder Morgan Interstate and probably CIG are running at low throughput levels because no one wants to use their capacity, the source said. As an example of why shipping gas east from the Rockies often fails to cover transport costs lately, he noted that the price spread between Cheyenne Hub and NGPL-Midcontinent has shrunk from about 75 cents during the fall 2000 through 2003 period to 19 cents last year and 12 cents on average over the last two months. Cheyenne Hub actually traded at a premium of 12 cents to NGPL-Midcontinent on Wednesday.
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