January-ending prices used a slight trend toward colder weather in northern market areas and residual support from Friday’s expiration-day gain of 17.1 cents by the January futures contract to rise at nearly all points Monday.
A flat NIT (NOVA Inventory Transfer) performance was the exception to the overall firmness. A majority of gains were in double digits as they ranged from a little less than a nickel to nearly half a dollar.
The February aftermarket is expected to get a strong launch Tuesday after March futures “celebrated” their prompt-month debut with a spike of nearly 90 cents. The natural gas screen got some help from continued strength in petroleum-related futures, but based most of its big advance on new forecasts indicating the current season is likely to become “winter” in more than name only in some areas around the second week of February (see futures story).
How far the anticipated firmness of the start-of-February cash market can extend is problematic, however, according to one source. With only two months remaining in the traditional storage withdrawal season (and one of them the shortest of the year), mandatory withdrawal ratchets will start to weigh more heavily on prices, he said, especially after many of this season’s pulls so far have been smaller than usual.
The Northeast was due to start feeling freezing temperatures in daily lows again Tuesday, along with occasional inland snowfalls. Snow will be fairly common in the upper West, as the Pacific Northwest and Northern California face a renewal of the series of winter storms that have deluged the region in recent weeks. But although the Midwest can expect some snow and freezing lows, in general temperatures will remain above season norms with a slightly milder trend getting under way. And the South should remain a bit confused about whether it is actually spring rather than winter.
A Houston source reported sunny weather in the 70s Monday afternoon, and said a Dallas trader had confirmed similar “gorgeous” conditions there. “It sure doesn’t feel like the middle of winter in Texas,” he added.
Although many traders wound up February business prior to the weekend, there was still some bidweek activity going on Monday. Thanks to the soaring screen, February prices were “up quite a bit” from last week, said a Texas-based marketer. However, trading was “very thin,” she said, as few companies besides hers were still making next-month baseload deals. She quoted bidweek numbers Monday of Southern Star Central, low $7.20s to low $7.30s; PG&E-Topock at $7.30; NGPL-TexOk at $7.40 and in the low $7.60s; and El Paso-Permian in the low $7.50s. That was almost a dollar higher in some cases than where those points were being quoted last Wednesday and Thursday, she said.
A Calgary-based producer said production-area trading for February may have still been somewhat active Monday, but not so in the market area. He was pretty sure that Chicago numbers would have been up about half a dollar if any deals got done, “but I didn’t see any bids or offers” at the citygate.
For Tuesday’s beginning of the February aftermarket, the producer said he sees basis getting weaker (that is, spreads between market and producing areas will get bigger), but actual prices should be up about half a dollar due to the Nymex spike. He said he perceived Monday’s cash gains as “not all that impressive compared with the Nymex strength.” It was still unseasonably mild in Western Canada as the week began, he said, but colder weather is in the forecast toward the end of the week.
The producer said he thinks effects of how storage affects prices during February will be regional. Those under mandatory withdrawal rules, such as in northern market areas, will see great price weakness, he said, but those who can cycle accounts at their discretion will be in the driver’s seat as far as supporting prices.
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