The physical market overall was unchanged Thursday, but that was due in large part to multi-dollar losses at constrained northeast pipelines such as Algonquin, Iroquois and portions of Tennessee. Omitting those losses from the equation results in a 6-cent market gain.
Higher prices were reported at nearly all points, and locations such as the Midwest saw prices rise more than a nickel. The Energy Information Administration (EIA) reported that an unsupportive 62 Bcf was withdrawn from storage, and at the close of futures trading, the April contract had fallen 2.5 cents to $3.935 and May had retreated 2.4 cents to $3.961. May crude oil fell $1.05 to $92.45/bbl.
Utility buyers have been buying gas left and right. “It seems like we can’t get above 35 degrees and we are doing about 150,000 to 160,000 Dth/d right now,” said a Midwest utility buyer. “The longer daylight reduces usage, and it’s not dipping way low at night, but we are having a bang-up March.”
The buyer said his company had been leaning heavily on the spot market, and “we have been needing more than what we came into the month with. Prices have been reflecting that. We had to pay about $4.30 for gas on Northern.”
Queried whether the cooler March temperatures would prompt the company to baseload more gas for April, the buyer said, “Yes. It looks like April will be cooler than normal, and we will be liquefying to fill up an LNG tank.”
Temperatures in the Midwest were forecast to remain solidly below normal. Wunderground.com predicted the 34 degree high in Chicago Thursday would reach 36 on Friday and 37 on Monday. The seasonal high in Chicago is 49. In Omaha, NE, Thursday’s high of 36 was expected to rise to all of 39 Friday and Monday. The normal high in Omaha is 53. In Minneapolis, Friday’s frosty high of 28 was predicted to make it to 30 Friday and 36 on Monday. The normal high in Minneapolis is 44.
The National Weather Service in the Twin Cities said, “With Canadian high pressure parked overhead…we are going to be on the cool side here in Minnesota/WI.” Temperatures were expected to work lower on chances for weekend precipitation.
Quotes for Friday delivery on Northern Natural Ventura were up 5 cents at $4.32, and gas at Demarcation was 4 cents higher at $4.31. On Alliance gas was seen at $4.36, 8 cents higher, and at the Chicago Citygates, next-day packages came in at $4.39, 5 cents higher. On Michcon Friday deliveries were 6 cents higher at $4.27, and on Consumers next-day gas was $4.33, up 7 cents.
At eastern points weakening next-day power prices helped drive Friday gas lower. IntercontinentalExchange reported that at the New England Power Pool’s Massachusetts Hub real-time peak power fell $15.65 to $73.48/MWh and next-day power at PJM West eased 84 cents to $56.21/MWh. Power deliveries, however, to the New York Independent System Operator’s Zone G (eastern New York) market center rose $9.16 to $67.00/MWh.
East Coast temperatures were expected to rise close to seasonal norms. Wunderground.com reported that Boston’s high of 39 Thursday was forecast to rise to 41 Friday and reach 43 by Monday, 4 degrees below normal. New York’s 45-degree high Thursday was predicted to hold both Friday and Monday. The normal high in New York this time of year is 51.
Gas delivered Friday to the Algonquin Citygates fell $2.40 to $9.17, and packages into Iroquois Waddington eased 18 cents to $5.92. Deliveries to Tennessee Zone 6 200 L dropped $2.65 to $8.77.
Gas on Dominion was seen two pennies higher at $4.10, and deals done for Friday gas on Tetco M-3 came in 8 cents lower at $4.41. Gas bound for New York City on Transco Zone 6 slumped 59 cents to $4.84.
With spot futures hovering just below the psychologically-important $4 mark and typically volatile trading expected following the morning release of the EIA weekly inventory report, the stage was set for April to reach if not surge above $4. It was creep rather than surge. On two occasions April did trade above $4.00, once at $4.003 and a second time $4.025 was reached.
“About 15 seconds before the release of the data prices started coming off, but 62 Bcf is a bearish number and we are essentially unchanged,” said a New York floor trader. “We actually traded $4.003 in early trading, but I’m thinking we won’t settle over $4. The trade above $4 doesn’t represent a strong market conviction.”
Others agreed the rally might be over. “The market’s more than 80-cent (27%) rally of the past month appears to have stalled after factoring in (albeit temporarily) the late-season cold and elevated heating demands that have pushed gas prices to near $4.00 for the first time since the end of October 2011,” said Addison Armstrong of Tradition Energy in a morning note to clients. “Weather forecasts are little changed from [Wednesday], with below- to much below-normal temperatures expected across the East during the remainder of this month, followed by a slight shift warmer at the beginning of April.”
A 70 Bcf draw was not to be, and prices stalled, but other estimates were higher. United ICAP was looking for a 72 Bcf withdrawal as was a Dow Jones survey. Bentek Energy calculated a 71 Bcf pull, and Ritterbusch and Associates was expecting a decline of 67 Bcf. Last year, no gas was withdrawn, and the five-year average is for a 26 Bcf pull.
Total inventories now stand at 1,876 Bcf, 502 Bcf less than last year and 162 Bcf greater than the five-year average. The report showed a 47 Bcf draw in the East Region and a 15 Bcf reduction from the Producing Region while the West Region remained unchanged.
The Producing region salt cavern storage figure added 5 Bcf from the previous week to 180 Bcf, while the non-salt cavern figure declined by 20 Bcf to 574 Bcf. The EIA first split Producing Region facility types in storage report footnotes in March 2012 in an effort to give analysts and industry more comprehensive information on the relationship between natural gas inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
Overnight weather forecasts didn’t change much. WSI Corp. in its morning six- to 10-day forecast shows below- and much below-normal temperatures encompassing three-quarters of the county east of a sinuous line from Montana to East Texas.
“There were no major changes with regards to [Thursday’s] forecast. The risk remains to the cold side for much of the Deep South early in the period, shifting to the Southeast and Mid-Atlantic states later in the period. Portions of the interior West could run slightly warmer than forecast as a ridge promotes warm weather over the region.”
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