Futures and the cash market parted ways Wednesday with the cash market holding on to gains of a few cents at most points and the futures stumbling to a double-digit loss as traders attempt to factor in what looks like another surplus-building inventory report Thursday and a revised weather outlook. At the close March had fallen 10.7 cents to $2.425 and April retreated 8.4 cents to $2.616. March crude oil added $1.06 to $101.80/bbl.

Gains in the cash market were most pronounced on El Paso and TransWestern as Southern California and points east were forecast to see significantly cooler temperatures. “We are kind of in the midst of a storm Wednesday afternoon,” said a Southern California marketing manager. “It’s definitely chilly out here by our standards. If you layer that on top of the San Onofre nuclear outages, it’s likely to mean a stronger [cash] market in the West than the East.”

The Weather Channel forecast that an upper level disturbance would dive southward from Nevada to Arizona Wednesday with the system producing rain and mountain snow from southern and eastern California through Utah. “Up to six inches of snow may accumulate in the mountains of eastern California, Nevada, Utah and northern Arizona,” it said.

Prices on El Paso and TransWestern posted the day’s biggest gains. Next-day deliveries on El Paso Permian were higher by nearly a dime and TransWestern was up by more than a nickel.

A Midwest utility trader noted that prices in his neck of the woods had backed off the last couple of days. “We had prices in the $2.60s earlier, and they are in the $2.50s Wednesday for Demarcation gas, but that’s because we’ve got some warmer weather coming in. It’s supposed to be 40 in eastern Nebraska by Friday and Saturday. It’s kinda hard to sell gas when it’s that warm.”

Quotes on Northern Natural Demarc and Northern Natural Ventura were flat.

Prices at Gulf points firmed. Henry Hub was quoted more than a nickel higher and Katy was seen up a couple of pennies. Parcels into ANR SE also rose a couple of cents.

Futures traders saw the day’s decline as a technical retreat from Tuesday’s close. “It looked like traders were playing off the low to mid $2.50 area. They were just selling off near-term resistance. That’s all it was,” said a New York floor trader. “I see the low $2.30s to mid $2.40s as support and the low to mid $2.50s as resistance. It’s a pretty tight range.”

Estimates of Thursday’s Energy Information Administration storage report were also within a tight range. Kyle Cooper of IAF Advisors calculated a pull of 121 Bcf for the week ended Feb. 10 and a Reuters poll of 24 traders and analysts revealed a 120 Bcf average with a range of 109 Bcf to 133 Bcf. Industry consultant Bentek Energy’s North American flow model expects a draw of 119 Bcf. Last year at this time a hefty 230 Bcf was withdrawn and the five-year average stands at 178 Bcf.

A warmer weather forecast helped push futures lower. East of a line from Montana to East Texas was forecast to be above normal, WSI Corp. of Andover, MA said in its morning six-to-10-day outlook. “Above normal temperatures are forecast over the northern Plains and most of the eastern half of the country. Anomalies as warm as 10 degrees above normal are anticipated over the northern Plains. Near and below normal readings are expected to encompass the western U.S.”

WSI said Wednesday’s forecast was warmer in the Northeast than it was Tuesday.

Analysts didn’t have a strong conviction that Tuesday’s 10-cent gains reflected any significant change in the supply/demand balance and characterized the rise as “a search for trading volume that prompted some likely short-covering in March futures, with smaller gains on out the curve,” said Tim Evans of Citi Futures Perspective in New York. “With updated weather forecasts little changed from a day ago, there was no apparent fundamental shift to help sustain the push higher and the advance stalled, although the market still managed to retain the bulk of its advance.

“Some of the gains [Tuesday] might have been based on expectations for a significantly less bearish storage report for this week, with the modest 78 Bcf net withdrawal from the week ended Feb. 3 having set the bar quite low. We’re seeing some other estimates in the neighborhood of 120 Bcf, and our own model projects a somewhat stronger 129 Bcf withdrawal. But while in some sense the higher the storage withdrawal, the more supportive it should be for prices, we note this would still be a bearish result in comparison with the 178 Bcf five-year average draw.”

Forecast heating loads look to continue the trend of modest gas heating requirements in major energy markets. The National Weather Service predicts that for the week ending Feb. 18, New England will see 227 heating degree days (HDD), or 39 fewer than normal; and the Mid-Atlantic states of Pennsylvania, New Jersey and New York will have 221 HDD, or 26 fewer than the seasonal average. The Midwest from Ohio to Wisconsin should experience 243 HDD, or 23 fewer than its normal tally for this time of year.

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