Prices for weekend and Monday gas gained about 9 cents overall, but if Northeast points basking in mild temperatures are factored out, the gain was 12 cents.
Expectations of cold weather over the weekend and into next week drove most points higher. February gained 13.4 cents to $3.327 and March added 12.8 cents to $3.336. February crude oil eased 26 cents to $93.56/bbl.
Rockies traders were keeping a close eye on basis differentials. “CIG relative to the Hub is about 10 cents [Friday], but I’m sure it’s all due to the weather,” said a Rocky Mountain producer. “It’s 10 cents for Saturday, Sunday and Monday, but through Thursday it was just 1 cent. The message here is that there is plenty of pipeline capacity. Kinder Morgan and Bentek have said that the Rockies probably have 2-3 Bcf/d of surplus capacity.
“I think the market has been slow to focus on what they call a polar-vortex collapse where all the cold air moves south. The forecasts are saying this could last clear into February starting next week.”
Weather pundits see the cold hitting Chicago Saturday. “Following another batch of rain, the colder air will reach Chicago Saturday night, then Detroit and Cincinnati on Monday. Cooler air will return to Boston, New York City and Washington, DC, on Tuesday,” said AccuWeather.com meteorologist Alex Sosnowski.
“Additional waves of Arctic air may continue later in the month into February from portions of the Plains to the East with the potential for the coldest weather in years for northern areas as the pattern gets rolling.
“The bottom line is while the expansion of warmth will continue through the weekend in the East and will bounce back [this] week for a time in parts of the Plains and East, the lasting memory of the season may be remembered for a return to more traditional winter conditions.”
Steadily plunging temperature were on tap for Rockies points as well as traditional downstream delivery points. Denver’s high Friday of 40 was anticipated to drop to just 17 Saturday as the Broncos and Baltimore Ravens take the field for an AFC football playoff game. By Sunday temperatures were expected to rise to 23, and Monday’s forecast high was to reach 23. The normal high in Denver is 44 at this time of year.
Chicago’s Friday high of 53 was expected to ease to 50 Saturday before dropping to 30 on Sunday. Chicago’s seasonal high is 31. St. Louis’ balmy 64 high Friday was predicted to slide to 52 Saturday before plunging to 33 on Sunday. St. Louis’ normal high is 39 at this time of year.
Quotes on CIG jumped 16 cents to $3.28, and deliveries to the Cheyenne Hub added 15 cents to $3.32. At Opal weekend and Monday gas went for $3.38, a gain of 14 cents, and on Northwest Pipeline WY deliveries jumped 16 cents to $3.38. Parcels on Questar for the Saturday-Monday added a stout 20 cents to $3.34.
Northeast points not immediately in the path of the cold air plummeted. Weekend gas into the Algonquin Citygate dropped 53 cents to $3.61, and deliveries to Iroquois Waddington skidded 25 cents to $3.70. On Tennessee Zone 6 200 L weekend and Monday gas dropped 41 cents to $3.65.
Short-term futures traders saw the market trading up to technical resistance. “We got some short covering and some new buying and at the end of the day traders tried to keep it pushed up against that resistance level [$3.33],” observed a New York floor trader.
It was the trader’s thinking that the market was poised to break the resistance on Monday. “That will set the market up for the low $3.40s although at that point I think the market will get a little heavy again, and traders will look for a spot to sell.”
Analysts saw the market continuing to be driven by temperature outlooks, but those forecasts didn’t seem to have enough muscle to drive prices more than a few cents higher.
“[W]hile the below-normal expectations are now extending across most of the U.S., including heavily populated metropolitan areas such as Chicago and New York, we are still not seeing enough deviation from normal to support a decided bullish opinion,” said Jim Ritterbusch of Ritterbusch and Associates. He said Thursday’s unusually strong supply draw would be offset this week with an exceptionally small decline given last week’s mild temperatures. “Overall, we see daily changes to the one- to two-week temperature expectation as driving this market both up and down, mainly within the confines of about the $3.05 to $3.30 price parameters.”
He sees the year-on-five-year surplus as the more important price driver. “Although our existing recommended short position could be challenged in today’s trade, we will continue to emphasize a bearish view in which a shift to a year over year supply shortfall has been priced in. A sizable overhang against five-year average levels is the more important pricing consideration in our view, and we look for a large surplus to be maintained through the balance of the winter season,” Ritterbusch said in a morning note to clients.
One school of thought is that recent market strength is just traders making adjustments rather than any fundamental recognition of a changed weather or fundamental outlook. “[Thursday’s] nearly two-year high storage withdrawal continued to prompt short-covering. Weather forecasts are little changed from yesterday, with above- to well above-average temperatures expected across the East in the next five days,” said Addison Armstrong at Tradition Energy.
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