The cash market on average gained 4 cents Wednesday for Thursday delivery as the midsection of the country continued to get lashed by snow, cold and generally winter-like conditions. California and Midwest points were strong, and other market centers posted more moderate gains. At the close of futures trading, June had eased 1.7 cents to $4.326 after posting a new 21-month high at $4.440 earlier in the day. July had fallen 1.5 cents to $4.379, and June crude oil was clobbered, falling $2.43 to $91.03/bbl.
Through the Midcontinent region, from Illinois to Oklahoma, next-day gas prices enjoyed above-average gains as a phalanx of cold air headed south and east through the Plains and into the Midwest.
“Cold and active weather will continue for parts of the Central U.S. and Rockies on Wednesday as a strong cold front extending from the Upper Midwest and southward across the Central Great Basin reaches from the Upper Great Lakes through the Southern Plains by Wednesday evening,” said Wunderground.com meteorologist Kari Kiefer.
“Strong winds, plummeting temperatures, and organized rain and thunderstorms are expected to accompany this disturbance from the Upper Great Lakes through the Central and Southern Plains. Areas from northwestern Texas through the Edwards Plateau area are at slight risk of severe thunderstorm development through the mid-evening with threats of large hail and isolated damaging wind gusts.”
Temperatures were forecast to be well below normal. Wunderground.com predicted Chicago’s Wednesday high of 84 would drop to 63 Thursday and 54 by Friday, 11 degrees below normal. In Wisconsin, Milwaukee’s high Wednesday of 73 was expected to fall to 48 Thursday and 46 by Friday, well off the seasonal pace of 60. Kansas City, MO’s 79 degree high Wednesday was forecast to plunge 41 on Thursday and 46 by Friday, 24 degrees below normal.
Quotes for Thursday delivery on Alliance rose 7 cents to $4.45, and deliveries to the Chicago Citygates gained about 7 cents to $4.43. On Northern Natural Ventura, next-day gas was seen at $4.39, up 9 cents and at Demarcation, gas came in at $4.36, up about 7 cents. Packages on NGPL Amarillo were seen at $4.28, 8 cents higher.
Next-day gas at California points rose as quotes for day-ahead power advanced at major trading centers. Intercontinental Exchange said the California Oregon Border next-day peak power added $1.59 to $42.86/MWh, and at NP-15 next-day peak power deliveries gained $1.43 to $50.44/MWh. At power-hungry SP-15, next-day peak power gained $3.37 to $62.49/MWh.
Gas quotes took notice. At the PG&E Citygates, next-day deliveries added about 7 cents to $4.45, and at the SoCal Citygates Thursday deliveries rose 8 cents to $4.53. Gas at the SoCal Border tacked on 6 cents to $4.35, and deliveries on El Paso S Mainline rose by 7 cents to $4.42.
Other trading points showed more modest gains. The Henry Hub was up about a penny at $4.30, while gas deliveries on El Paso Permian rose 3 cents to $4.16. Next-day packages at the Cheyenne Hub added 5 cents to $4.18, and gas bound for New York City on Transco Zone 6 was up a cent at $4.49.
In spite of the day’s losses, futures traders see a continued uptrend. An Oklahoma City broker, using a trend-following model, said, “I turned bullish about the first week in March. I would exit the current long and go flat if the July contract settled under $4.10. From there I would have to watch the market a little bit before I went short.”
Analysts suggest that the market’s strength is in large part due to perceptions of a supportive storage report by the Department of Energy’s (DOE) Energy Information Administration on Thursday. Tim Evans of Citi Futures Perspective said “the market was “in retreat during Tuesday’s session, unable to sustain the higher level of the sense of upward momentum. The prospect of supportive DOE storage data for the week ended April 26 remains a key fundamental focus for the market.
“Consensus expectations are still forming, but the handful of estimates we’ve seen so far suggest a 30-31 Bcf net injection to match the prior two reports, a bullish figure compared with the 67 Bcf five-year average for the date.”
Evans’ model predicts a somewhat more bullish 25 Bcf injection and “suggest[s] some risk of a bullish surprise on Thursday. However, it also projects above-average storage injections in the weeks ahead, suggesting that Thursday’s report could be the last in a bullish series.” Evans’ figures show that by May 17, the year-on-five-year surplus is at a 114 Bcf deficit.
A Reuters poll of 19 traders and analysts revealed a 28 Bcf average injection, while IAF Advisors’ Kyle Cooper is looking for a 32 Bcf build. Bentek Energy flow model forecasts a 31 Bcf increase. Last year 31 Bcf was injected, and the five-year average stands at a 67 Bcf increase.
INTL FC Stone Vice President Tom Saal, using the Market Profile, correctly predicted that the market would test Tuesday’s value area at $4.365-4.334. Saal anticipates the market will “eventually” test $4.175-4.103 and $4.425-4.407, but admits that he is not sure in which order the second two value areas will be tested.
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