With Friday’s predicted lows ranging from sub-zero to the teens and 20s from the Rocky Mountains through the Plains and Midwest into much of the inland Northeast, the surge of heating load was able to rally prices at a solid majority of points Thursday. Cash gas got a small extra boost from the prior-day advance of 3 cents by January futures, which ended a six-session losing streak for the Nymex contract.
Flat to a little more than $1.40 lower numbers at several points kept mixed price movement in play. Gains ranged from 2-3 cents to about 30 cents.
The softness was concentrated in the Rockies and Northeast. Declines were small in the Rockies at around a nickel but much bigger in the Northeast, where citygates continued to retreat from the dizzying heights they had hit earlier in the week. And although temperatures would stay cold into the weekend in the region, a modest warm-up will be under way Friday. Boston and New York City are expected to see highs around 40, which would be five to seven degrees higher than Thursday’s peaks.
Despite their large declines, five Northeast points — Algonquin citygate, Dracut, Iroquois Zone 2, Tennessee Zone 6 and Transco Zone 6-New York City — were still averaging in quadruple digits Thursday.
Friday’s cash market will have extra support from futures after the Energy Information Administration exceeded expectations in reporting a storage withdrawal of 88 Bcf for the week ending Nov. 30; prior estimates had centered around 80 Bcf. With a little help from soaring crude oil prices, Nymex traders pushed January natural gas futures 14.5 cents higher.
In a “flash commentary,” Citigroup analyst Tim Evans said, “The draw was larger than generally expected and suggests that last week’s smaller than expected 12 Bcf draw may have been on the low side — possibly a timing issue between the two periods. Nonetheless, the larger draw this week suggests we ought to look at boosting our estimates for future weeks as the balance in the market may have shifted.”
While the cold snap will remain in northern market areas, the already fairly moderate South will be getting warmer. For instance, Thursday highs of about 52 in Atlanta and 49 in Memphis are expected to yield to Friday mercury levels around 60 and 62, respectively.
Northern Natural-Ventura extended its premium over the pipeline’s demarcation point to nearly 90 cents. Besides Minneapolis, Northern’s biggest single market area, being predicted to peak at 17 degrees and bottom out at two degrees Friday, the pipeline’s bulletin board provided another indicator of how strong heating load is in the Upper Midwest. Northern’s normal system weighted temperature at this point in the year is 24 degrees, but it projected seeing averages of 20 Thursday and falling to 11 Friday, six Saturday and eight Sunday.
Asked why Texas M-3 prices lagged way behind while the other Northeast citygates skyrocketed earlier this week (M-3 was the only one that failed to average above $10 at least once), a Gulf Coast producer said it was difficult to pinpoint the reason, but he suspected it was because “everybody’s maxed out” on Texas Eastern. Northeast utilities with M-3 access baseloaded large amounts for December on Texas Eastern because it’s the least-cost transport option from the South Texas supply area, the producer said. Thus there’s relatively little incremental capacity left available at M-3, he added.
Noting that Thursday’s overall upticks had returned many points to approximate parity with first-of-month indexes or even small premiums in some cases, a Midcontinent producer said he thinks cash gas will continue to rise Friday, particularly in his own region. “A pretty good cold front is moving our way with possible snow and ice,” he said. However, the eight- to 14-day forecast is rather bearish, he said, so it looks like the current price firmness won’t last much longer.
Despite the severe cold to the north of him, another Midcontinent producer perceived “not that much volume” in Thursday’s trading. CenterPoint numbers were pretty strong and in the midst of the Midcontinent pack Thursday after being new the low end Wednesday. Despite the ostensibly bullish storage report, he said his market attitude was still mildly bearish because “there’s still a lot of storage gas that has to be used.”
The producer said it was hard to call Friday’s market. Northern market areas will stay pretty cold through the weekend and physical gas will have increased prior-day screen backing, he noted, but weather will be relatively moderate across the South. The decline of industrial load during a weekend will also be a negative price factor, he said.
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