Although one source dismissed the latest surge of winter cold in northern market areas as “nothing to write home about,” temperatures are dropping low enough to ignite price increases at virtually all points Thursday. The previous day’s screen rebound of 19.1 cents provided additional support for cash quotes Thursday.
Only a flat Florida citygate averted an across the board run of firmness. Northeast citygates, where sub-freezing lows will be setting in Friday and over the weekend, led the uphill price charge with gains of as much as 80 cents. Elsewhere, the advances ranged from about a dime to nearly 60 cents, but nearly all of those were around 30 cents or less.
Even with Thursday’s jumps, nearly all points are still trading at double-digit deficits to first-of-month indexes. Flat-to-index Algonquin citygates are the exception, while two other Northeast points (Iroquois Zone 2 and Transco Zone 6’s non-New York City pool) are less than a dime below index.
Cold weather will linger through the weekend in the Midwest and Northeast. But although the Northeast can expect a warming trend starting early next week, a new cold front will be moving through the Plains, Great Lakes and Ohio Valley on Sunday and Monday with showers ahead of it and snow showers around the northern Great Lakes, The Weather Channel said.
Meanwhile, conditions are changing little in other regions. The South is due to stay moderate to cool, while it’s downright warm through much of the West. Phoenix has already started seeing highs in the low 90s, making it likely that gas is seeing a bit of power generation load for air conditioning in the desert Southwest.
Noting that the Northeast’s “flirtation with spring” has been abruptly ended by an “intrusion of cold Canadian air and developing significant Nor’Easter snow event,” Weather 2000 observed in a Thursday advisory that “when we mentioned cold and snowy weather returning to the northern and eastern states ahead of the St. Patrick’s Day Weekend, we meant cold and snowy. After a pleasant respite from the harshness of the 2007 winter, with balmy temperatures expanding over most of the nation this week, the next polar wave is diving down from Canada, right on schedule…The weather will swing back in a spring-like direction for [the] nation next week (especially for central U.S.), but northern and eastern states still remain vulnerable to occasional winter-like episodes…through mid-April.”
The Energy Information Administration (EIA) met most industry expectations precisely in estimating a storage withdrawal of 115 Bcf for the week ending March 9. Nymex traders focused instead on forecasts of mild weather from next week onward in sending April futures to a loss of 12.4 cents Thursday.
Citigroup analyst Tim Evans was near the high end of storage report expectations in projecting that a pull of 125 Bcf would be announced. However, he is scaling back estimates for the next two reports tremendously, saying he expects withdrawals of 15 Bcf and 40 Bcf for the weeks ending March 16 and March 23, respectively.
In a Wednesday afternoon commentary prior to the latest report, Evans wrote, “While the DOE [Department of Energy, which contains the EIA] may report a big withdrawal on Thursday…we think the market is going to have difficulty sustaining a bullish price response as traders are already well aware that it was cold last week and equally well aware that the market lacks any kind of credible ongoing drain on storage. Our current intermediate-term storage forecast, for example, suggests that whatever is pulled off the 194 Bcf year-on-five-year storage surplus of March 2 in Thursday’s report is going to be added right back.”
If Evans’ projections prove to be correct, Thursday’s 37 Bcf reduction of the surplus will be followed by surplus increases of 39 Bcf and 2 Bcf in the next two reports.
Columbia Gas gave Firm Storage Service (FSS) customers a break by waiving the 10% minimum monthly withdrawal of Storage Contract Quantity (SCQ) for March. But it reminded customers that a requirement that maximum FSS inventory on April 1 shall not exceed 25% of SCQ remains in effect.
A Northeast marketer agreed with other sources that cash market activity has been very quiet this week, but said “trading got a little more intense” Thursday now that heating load was on the rise again. Chill will remain in the Northeast through the weekend, he added, “but it’s nothing to write home about.” He reported failing to see anything in the cash market to get bullish about.
A Calgary-based producer said prices were falling in late deals after the essentially neutral storage number came out. That’s usually a good indicator of the following day’s cash price direction, he noted, but he expects that quotes will stay mostly around flat or be a little higher or lower because cold weather will stick around in northern U.S. market areas through the weekend.
The producer, who used to work the British Columbia market but now is assigned primarily to NOVA Inventory Transfer sales, commented that NOVA is significantly stricter than Westcoast about enforcing imbalance tolerances, to the point of reducing scheduled volumes if underdeliveries occur. Thus, it’s a little tougher dealing with NOVA constraints, he said (there aren’t any now with the pipeline’s imbalance tolerance range set at the normal +4%/-4%), but working the intra-Alberta market offers “a lot more options and liquidity” since NOVA capacity of 11-plus Bcf/d a little more than 10 times that of Westcoast.
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