Cash market quotes nationally were mostly unchanged, but prices declined sharply at New England points and made gains at Midwest locations. A smaller-than-expected inventory draw of 78 Bcf prompted initial futures declines, but traders reconsidered and prices staged a modest advance on the day. At the close March had risen 2.9 cents to $2.477 and April had improved 3.8 cents to $2.636. March crude oil rose $1.13 to $99.84/bbl.

An East Coast marketer said it’s “all about the weather” as next-day gas at Northeastern points spiraled lower. Deliveries Friday into Algonquin citygates swan-dived by more than 20 cents, and quotes at Dracut and Iroquois Waddington plunged about the same.

A relatively mild Friday was expected to be punctuated by cold and snow over the weekend. The National Weather Service (NWS) in southeast Massachusetts said “high pressure through Friday will bring dry…quiet…slightly above-normal weather to the region. Low pressure will develop south of New England early Saturday…which will likely bring a period of snow or rain changing to snow to most areas. This will likely mean accumulating snows for portions of the region. An Arctic front will move through late this weekend…ushering in a brief shot of Arctic air late Sunday into Monday. Temperatures will then moderate by the middle of next week.”

Forecaster Wunderground.com said the high in Boston Friday was expected to reach a relatively mild 47, up from Thursday’s high of 46 and well above the seasonal norm of 38. By Monday, though, the high was expected to be only 31.

A Houston-based marketer commented that with eastern temperatures being so mild “demand is just not there for the power loads and other guys burning gas. But Friday we will be trading for the weekend, and it looks like the average temperature for Saturday will be about 26 [Boston] and Sunday will be about 15. That will be the second coldest day of the year.”

Friday’s trading will secure incremental supplies for the weekend; he added that although prices would normally recede a little because of lighter weekend demand, this time “it will be up considerably. If I had to estimate, it will be substantially higher. The normal January spread between Tennessee Zone 6 200 Leg and Nymex is $4.26, so with Nymex at $2.47 [Friday’s] cash could be in that $6 range.”

Across the Midwest prices rose by as much as a dime. On Michcon Friday gas was upa couple of pennies and prices at the Chicago citygates were up just less than a nickel. At Northern Natural Gas Ventura quotes were close to 10 cents higher.

Chicago meteorologist Tom Skilling said on his Facebook page that a lake snow watch was in store for the area Friday afternoon and evening. “A classic lake snow situation is coming together as arctic air and strong north winds hit! Mild winter means there’s no ice on Lake Michigan and lake water temps are running one degree Fahrenheit warmer than average. Arctic air’s arrival sets up explosive instability with temps in the lowest mile of the atmosphere dropping by 30-plus degrees by Friday night fostering snow development.”

Skilling forecasts Thursday’s high of 41 in the Windy City will drop to 31 Friday.

Prices on the West Coast were flat to slightly lower as mild weather was forecast to dominate much of the area. Quotes at Malin were about a penny lower and next-day gas into PG&E citygates was flat. At SoCal Border prices fell about a cent.

NWS in Los Angeles said “high pressure and offshore winds will produce clear skies and above-normal temperatures [Thursday] and Friday. A series of low-pressure troughs will cross the region from Saturday through the middle of next week. These weather systems will bring a slight chance of showers to the area along with increasing clouds and a sharp cooling trend.”

Wunderground.com predicted the high Friday in Los Angeles would reach 77, seven degrees above normal.

Futures traders were expecting a hefty increase in the storage surplus with the 10:30 a.m. EST release of inventory figures by the Energy Information Administration. With the reported 78 Bcf withdrawal there is a now a plump 2,888 Bcf in storage, a whopping 714 Bcf above last year and also 714 Bcf more than the five-year average.

Going into the report for the week ended Feb. 3, a poll by Reuters showed an average 87 Bcf withdrawal was expected by the 24 analysts queried with a range of 74-105 Bcf. Ritterbusch and Associates said it was looking for a draw of 89 Bcf, and industry consultant Bentek Energy calculated a pull of 83 Bcf.

Students of the report were confident that their numbers would be right on target. In Energy Metro Desk John Sodergreen, publisher, said “The coming week’s [Thursday’s] report is setting up to be a gimme, analysts say. Though our Early View report from Feb. 3 came in at a tad above minus 95, the prelim consensus this week is in the mid-to-upper -80s. No surprises are expected. Famous last words…” Indeed.

If forecasted heating requirements in major energy markets are any guide, the storage surplus is likely to continue growing. The National Weather Service (NWS) in its estimate of heating degree days (HDD) for the week ended Feb. 11 shows the Northeast and Midwest well below their historical averages. NWS calculated that New England would see 212 HDD, or 64 fewer than normal, and the Mid-Atlantic states of Pennsylvania, New York and New Jersey would have 201 HDD, or 55 fewer than normal. The Midwest from Ohio to Wisconsin was forecast to see 243 HDD, or 36 fewer than the norm.

Thanks to a growing storage surplus and mild temperatures, Stephen Smith of Stephen Smith Energy Associates said he sees natural gas prices remaining well below $3 for some time to come.

Assuming 95% of normal heating degree days from Feb. 17 through March 30 and that Lower 48 dry gas production is reduced by 1.5-2 Bcf/d from February through June relative to the trend growth line of the last 18 months, Smith forecasts that the three Henry Hub futures contracts for April through June will average $2.64/MMBtu, down from the average $2.78/MMBtu April-through-June close on Feb. 3.

Going off of this base case, Smith said storage levels could exit the withdrawal season on March 30 at 2,272 Bcf, which would be 709 Bcf more than the 2006-2010 norm of 1,563 Bcf.

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.