Most cash market points gained a few cents, lost a few cents or stood unchanged Wednesday, except for deliveries into the Northeast, where a handful of points posted double-digit gains due to cooler weather. Futures elected to go their own way and closed higher. At the closing bell April futures had risen 9.7 cents to $2.616 and May had improved 8.3 cents to $2.710. April crude oil rose 52 cents to $107.07/bbl.

With March bidweek trading finished, a southern California marketer noted that prices for gas delivered March 1 were trading very close to their estimates of March indexes. “Rockies gas is right around $2.39 to $2.40 and that is right around [our estimate of ] index. SoCal Border is trading $2.60 and that’s what we think index will be. SoCal Citygate is $2.74 and that is a couple of pennies higher, but that is all noise,” he said.

The marketer noted that gas into California from the San Juan and Permian basins was off about a nickel from [their] bidweek estimates, but the Palo Verde Unit 1 nuclear unit had ramped up output and “Palo Verde Unit 1 was up to 70% today. It had been operating at 40% since the 26th, and maybe the generators weren’t buying as much because they were picking up the power from outside the state. APS [Arizona Public Service] is buying basin gas for that, and if they ramped up they are probably backing off basin gas,” he said.

Prices for gas on the main delivery routes into southern California slumped. Next-day gas on El Paso Southern Mainline was off nearly a dime, and El Paso Permian deliveries slipped just over a nickel.

Northeast prices advanced on weather and end of the month adjustments. “It’s a little cooler and I think people got caught a little shorter than expected, but once things warm up prices should back off,” said an eastern marketer. He noted that when trading began Wednesday “things were pretty weak. $3 traded on Algonquin and then the next trade was $3.20. Today got jacked up because it will be colder tomorrow.”

Quotes on Algonquin were over a dime higher, and thinly-traded Dracut surged over 35 cents. Iroquois Waddington enjoyed gains of nearly 20 cents, but Tennessee Zone 6 200 L added just under a dime.

Midcontinent prices eased. Parcels on ANR SW fell just under a nickel, and NGPL Midcontinent was quoted a few cents lower. Deliveries to Panhandle fell a couple of cents as well.

Futures traders will be taking a close look at Thursday’s Energy Information Administration inventory report to discern if announced production cutbacks or a lower rig count might finally be impacting storage. Last year at this time 85 Bcf was pulled from storage and the five-year average stands at 118 Bcf.

A Reuters survey of 24 traders and analysts revealed an average draw of 90 Bcf with a sample range of 74 Bcf to 105 Bcf. IAF Advisors of Houston expects a pull of 84 Bcf and industry consultant Bentek Energy utilizing its North American flow model calculates a withdrawal of 90 Bcf.

Technical analysts see the market in a trading range and precariously holding on to $2.50 support. “I think $2.50 support is vulnerable but the more important level is around $2.39,” said Steve Blair of Rafferty Technical Research in New York.

“It’s been somewhat rangebound the last couple of weeks, and I think it will stay that way unless something changes with the weather or we get any new production shut ins. I look for a range of about $2.40 to $2.70, where it has been trading for the last week or two,” said Blair.

Another analyst is thinking that mild weather and abundant gas in storage may not be entirely discounted by the market. “With another mild temperature forecast at its back, the natural gas market took a fresh look at the downside on Tuesday, with the new front April contract checking out the same basic level vacated on Monday by the expired March contract,” said Tim Evans, analyst with Citi Futures Perspective in New York. “April futures traded at their lowest level since Feb. 2, and its settlement at $2.519 was the lowest since Jan. 19. With mild temperatures forecast east of the Rockies over the next two weeks and the winter storage withdrawal season to end shortly thereafter, the market looks vulnerable to further declines.”

Evans is looking for an 85 Bcf injection in this week’s storage report and notes that this is well below the 118 Bcf five-year average. “Although prices can sometimes diverge from the intermediate-term fundamental pressure indicated by the year-on-five-year average comparison, new highs in the surplus represent at least the possibility of new lows in price.” Evans recommends holding on to a short position in the April contract initiated at $2.69 and lowering the protective buy stop to $2.73.

Up until Wednesday April futures had slumped more than 25 cents in the last four trading sessions, and according to Peter Beutel, publisher of Daily Oil Hedger, “It was inevitable, really; after prices rallied and relieved short-covering pressures, prices were bound to sell off again. This market is just too abundantly supplied and temperatures have been warmer than average all winter.”

Beutel’s assessment shows a deeply oversold market with “prices [that] could not get beyond their upper, blue Bollinger band, and they sold off quickly after touching it seven trading days ago. Prices had actually gotten overbought in the process and the combination was too much for this market to overcome. On top of that, the bears never really stopped selling, and we still have funds that have been adding to short holdings, presumably against long positions elsewhere, possibly even in the oil complex. They have been increasing their short holdings for three years now. Open interest has increased by a quarter million contracts since late December.”

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