Physical natural gas prices continued their broad retrenchment Thursday with New England and Mid-Atlantic locations continuing their dollar-plus declines. Pipeline delivery points servicing New York and Boston were particularly hard hit, and on average the market fell about a quarter. Take away the Northeast and the overall average drops to a 12-cent decline. February futures fell 3.5 cents to $3.198, and March shed 4.1 cents to $3.214. February crude oil lost 20 cents to $92.92/bbl.

Marketers in the Great Lakes reported that despite the cold temperatures there was no sense of urgency to buy gas. “Beyond index we haven’t bought any gas for this month. Perhaps Friday for the weekend,” said a Michigan marketer. He cited weather forecasts calling for warmer temperatures and under those conditions gas purchases were in a kind of wait-and-see mode.

“We bought less gas than we normally do at index. It’s probably best to see what’s going to happen [in the spot market],” he said.

From a short-term market perspective, watching and waiting may be the prudent course. According to Alex Sosnowski, meteorologist, “Winter will sound the retreat of cold air and snow over much of the nation for the second week of January. Snow cover that has reached about two-thirds of the nation to start the year will not last due to an upcoming shift in steering-level winds.”

“These high-flying, high-velocity winds, known as the jet stream, will pull northward during the second week of the month, allowing temperatures to moderate, which in turn will melt a substantial amount of snow outside of ski country. As the polar air retreats, milder Pacific air will flow in to takes its place.”

AccuWeather meteorologists calculate that temperatures may reach 15 to 25 degrees above normal for several days to perhaps a week or more from the northern Rockies eastward to the interior South and much of the Midwest and at least part of the Northeast.

Quotes at Great Lakes points lost more than a dime. Michcon was quoted at $3.27, down 12 cents, and Consumers was seen 12 cents lower at $3.30. Buyers at the Chicago Citygates were able to buy for 17 cents less at $3.24, and on Alliance next-day gas fell 14 cents to $3.23. At Dawn Friday gas dropped 4 cents to $3.44.

Farther west, prices also weakened. Gas at Demarcation for Friday traded 17 cents lower to $3.21, and deliveries on Northern Natural Ventura dropped 19 cents to $3.19.

The Northeast continued its wild and woolly ways with multi-dollar price drops at several points. Algonquin Citygates was quoted at an average $7.10, down $3.38, and Iroquois Waddington was seen 57 cents lower at $4.73. Tennessee Zone 6 200 L gas was off by a stout $2.44 to $6.85.

New England power prices continued to tumble. IntercontinentalExchange reported that day-ahead peak power at the New England Power Pool’s Massachusetts Hub fell $25.82 to $60.66/MWh, and next-day peak real-time power at the PJM West terminal skidded $6.11 to $36.53/MWh.

Farther south, price swings were almost as wide with gas on Transco Zone 6 into New York plunging $3.74 to $6.01. Tetco M-3 was quoted 32 cents lower at $3.50, and deliveries Friday on Dominion shed 6 cents to $3.03.

Futures traders see the possibility of higher prices once traders begin returning next week. “Should the market build a base here, there is a good chance we break through going into next week once the virtual room [screen trading] is full again. I think you will get some support that comes back in,” said a New York floor trader.

“We do have some cold weather floating around, so fundamentally it makes more sense to hold the market up than push it down. That $3.05 is a low that will probably stay around for a while.”

Longer term, analysts still see the market under a continuing siege brought on by forecasts of mild temperatures and continued expectations of heavy storage. “Natural gas futures plunged nearly 12 cents [Wednesday], to a three-month settlement price low at $3.223 as weather forecasts indicating above-normal temperatures during January and record storage levels of gas depressed the market,” said Addison Armstrong at Tradition Energy.

Others agree. “In brief terms, the upper Midwest is expected to see exceptionally warm trends through most of next week. And while the more extended eight-14 day view into mid-month is showing smaller deviations from normal, the breadth of the anticipated mild patterns across the eastern half of the U.S. is providing a definite bearish consideration,” said Jim Ritterbusch of Ritterbusch and Associates.

Ritterbusch is having a change of heart regarding market strategy. “We canceled our guidance suggestive of long positions within the $3.31-3.34 zone per [Wednesday morning’s] commentary. Today’s price breakdown to below a three-week shelf of support at about the $3.30 level would appear to open the gates for further price declines to the $3.05 level that were briefly achieved within the thin overnight trade. The $3.30 level now becomes a major near-term resistance point. The money managers have been emboldened by a winter that appears to be shaping up to be much like last year. As a result, additional speculative selling would appear likely with commercial concerns steering clear of the long side amidst a record supply. In sum, additional price declines are anticipated with a potential run at the $3 area likely,” he said in closing comments to clients.

Things may not be as bleak as they seem for the bullish cause. Near-term forecasts of heating requirements are much greater than this time last year. The National Weather Service calculates that for the week ended Jan. 5, heating degree day (HDD) accumulations in major energy markets will be way above last year.

New England is anticipated to see 275 HDD, or 39 more than a year ago, and the Mid-Atlantic is forecast to endure 256 HDD, or 31 more than the comparable period in 2012. The Midwest from Ohio to Wisconsin is expected to shiver under 304 HDD, or 74 more than last year.

Indications are that storage surpluses might contract if estimates of Friday’s Energy Information Administration inventory report are correct. Kyle Cooper of IAF Advisors in Houston forecasts a pull of 125 Bcf, well ahead of last year’s miserly 77 Bcf reduction and the five-year average of 111 Bcf.

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