Cash gas prices overall for weekend and Monday delivery dropped an average of 6 cents, but if the distorting effects of Northeast pipelines are factored out, the national average comes in nearly unchanged. Eastern points followed soft power prices, but Rockies prices added about a nickel. The April contract shed 0.8 cent to $3.927 and May eased 0.9 cent to $3.952. May crude oil rose $1.26 to $93.71/bbl.
Rockies prices were strong as near-term weather turned cold, but producers looking down the road wondered if it might not be time to hedge at current robust prices. “We’ve got a lot of gas unhedged, but I think there is a little bit more to the upside,” said a Denver producer. “That’s a discussion we are having. Should we lock in now? Because gas pricing is just going to get killed by coal this summer; there’s no doubt about it.
“Also, the storage comparisons get ugly in the spring and uglier in the summer. Once you get past early April, storage comparisons are going to be impossible because we had such low gas prices last year and 5-7 Bcf/d of coal-to-gas switching. We are going to give a whole lot of that back.
“The current storage week starts today, and I don’t know how it ends, but it’s off to a good start. We are supposed to get hit with a big snowstorm and zero degree temperatures in Denver. We’ve got CIG at a premium to Henry Hub.”
Forecaster AccuWeather.com predicted well-below-normal temperatures for the region. Temperatures in Denver Sunday were forecast to reach a high of 29 and a low of 0. Kansas City was predicted to see a high Sunday of 39 and a low of 23. The normal high in Denver is 56 and Kansas City normally sees a 58 high this time of year.
Quotes for weekend and Monday gas on Northwest Pipeline Wyoming added 5 cents to $4.03, and deliveries to Opal also added a nickel to $4.03. On CIG Mainline, prices rose 9 cents to $4.05, and at the Cheyenne Hub weekend and Monday packages were seen at $4.09, 7 cents higher. Gas on Questar came in 3 cents higher at $3.98.
Eastern points were hit with falling Monday power prices. IntercontinentalExchange reported that real-time power delivered Monday to the New York Independent System Operator’s Zone G Market Pool fell $11.40 to $55.60/MWh and power at the New England Power Pool’s Massachusetts Hub tumbled $17.78 to $55.70/MWh. Power prices at PJM bucked the trend. Monday deliveries rose $7.80 to $64.01/MWh.
Gas for weekend and Monday delivery at the Algonquin Citygates tumbled $3.08 to $6.08, and deliveries to Tennessee Zone 6 200 L dropped $2.43 to $6.34. Gas packages into Iroquois Waddington slid 31 cents to $5.61.
On Dominion gas was seen at $4.07, 3 cents lower, and on Tetco M-3 weekend and Monday gas dropped 5 cents to $4.36. Gas destined for New York City on Transco Zone 6 fell 32 cents to $4.52.
Other market points showed little change. Columbia Gulf Mainline was unchanged at $4.02, and gas at Katy came in at $3.99, up a penny. Buyers on NGPL Midcontinent Pool paid 4 cents more at $4.00, and at the PG&E Citygates weekend and Monday deliveries were up a penny at $4.27.
Futures traders were looking for a repeat of Friday on Monday. “I think we come in a little bit higher and test $4 one more time,” said a New York floor trader. “I think they [traders] were protecting the $4 strike price all week and didn’t want it to get through there.” The trader expects April futures to test $4, but “I don’t really see it getting through there. There are still a bunch of shorts in this market, and I think if you get it above $4.05, you could run it up to $4.25.”
Options on April futures expire Monday.
Weather forecasts turned slightly cooler with blocking patterns expected to moderate. MDA Weather Services in its morning 11- to 15-day outlook shows below- and much below-normal temperatures extending in a broad ridge from West Virginia to Oklahoma to Alberta.
“This time frame has turned slightly colder from the Midwest to South, with blocking influences now slower to diminishing overall. While weaker signals than the prior periods, both the AO [Arctic Oscillation] and NAO [North American Oscillation] are on track to stay well within their negative phases, offering support for the cold outcome.
“Some variability associated with storminess is likely to continue through this time frame, though any associated warmth should be held to the South and of a limited intensity. Confidence is still moderate or better in a cold pattern persisting, but lower in the details such as coverage and intensity of belows [below normal temperatures].”
Jim Ritterbusch of Ritterbusch and Associates suggests that the market’s relative strength in the face of Thursday’s bearish (minus 62 Bcf) storage report may indicate further price advances. “Although our projected $4 price handle was attained in [Thursday’s] trade, overnight price action augers in favor of a run into new high territory up to the $4.05 area within the next couple of sessions.
“But we are viewing this bull move as in its very late stage in which downside price risk is beginning to exceed that to the upside. But while we can easily see some new highs, sustaining a $4 price handle could prove difficult, even if below-normal temperature trends are extended through the first week of April. Consumption is declining as temperatures will be increasing seasonally following next week’s cold spell. As the supply trough becomes better defined, we look for buying pressures to subside with the shoulder period, forcing some price consolidation that could see price declines to as low as the $3.60 area depending upon temperatures trends.”
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