Cash prices overall lurched higher Wednesday as weather forecasts continued to call for bone-chilling winds across major Midwest and eastern market centers. Without the multi-dollar gains posted at a handful of Northeast points, the average national gain was 8 cents, but with those gains factored in, the average rose to 21 cents.
Gains were widespread and only a handful of points showed declines. Futures traders seemed to take all the cold in stride. At the close March had risen 0.7 cents to $3.279 and April was unchanged at $3.331. The expired March crude oil finished at $94.46, down $2.20/bbl.
Marketers in the Great Lakes reported that purchases made prior to the extended holiday weekend were holding them in good stead as prices surged Tuesday and tacked on additional gains Wednesday.
“We bought through Tuesday with the long weekend and also a little bit for today [Wednesday],” said a Michigan marketer. “We bought at $3.34 and $3.35 on Consumers and $3.36 on Michcon.” How much longer the marketer can hold out may be open to question. “The high Wednesday is only supposed to be about 20 and it is windy and snowing.” High temperatures across the Great Lakes Thursday are expected to be as much as 14 degrees below normal.
Wunderground.com said Wednesday’s high of 25 in Chicago was expected to hit 30 on Thursday, 7 degrees off its seasonal norm. Wednesday’s wind chill of minus 4 degrees was anticipated to improve to 10 degrees Thursday. Detroit’s high Wednesday of 27 was predicted to slide to 25 Thursday with winds of five to 15 mph. The seasonal high in Detroit is 36. Cleveland’s high Wednesday of 27 was anticipated to fall to 23 Thursday with a wind chill of 5 degrees. The normal high in Cleveland this time of year is 37.
Next-day gas on Michcon rose 6 cents to $3.54, and deliveries on Consumers added 4 cents to $3.55. At the Chicago Citygates, quotes for Thursday gas rose 7 cents to $3.57 and on Alliance gas for Thursday came in at $3.55, 5 cents higher. At Dawn parcels for Thursday were quoted 5 cents higher at $3.63.
Prices at northeastern points were spread over a wide range, with gains of more than $2 posted at constrained locations, while points farther removed added only nominal amounts. Forecast temperatures were expected to be well below seasonal norms.
AccuWeather.com predicted that the high Wednesday in Boston of 36 would ease to 2 degrees on Thursday, which is 6 degrees off its normal seasonal pace. The high in New York City Wednesday of 35 was forecast to reach 31 on Thursday, well below a normal high of 42.
At the Algonquin Citygates, gas for Thursday delivery climbed $1.72 to $16.55, but deliveries upstream to Iroquois Waddington fell 12 cents to $4.79. On Tennessee Zone 6 200 L parcels for Thursday jumped $2.18 to $16.52.
Farther south gains were also wide-ranging. On Tetco M-3 next day deliveries rose 21 cents to $4.13, and on Dominion packages for Thursday were quoted 10 cents higher at $3.42. Gas destined for New York City on Transco Zone 6 vaulted $3.19 to $17.21.
By contrast futures trading was a snoozer. “We had a range of only 6 cents in the March contract and did only 2,000 block trades on Clearport. I think everyone is waiting for the storage number Thursday,” said a New York floor trader. “I am hearing a draw in the mid 120 Bcf range.”
Last week mild weather prompted a modest withdrawal from storage. ICAP Energy predicts a pull of 119 Bcf, and industry consultant Bentek Energy’s flow model calculates a decline of 122 Bcf. A Reuters poll of 20 traders and analysts resulted in a sample mean of 122 Bcf with a range from 116 Bcf to 134 Bcf. Last year 155 Bcf was withdrawn and the five-year average is for a 140 Bcf pull.
Most of Tuesday’s 12-cent futures advance was the result of changed weather forecasts, particularly the 11-to-15-day outlook, which has turned significantly cooler. That dynamic is still in play as forecasters see risks to their predictions in the form of still cooler temperatures in the Southeast.
WSI Corp. in its Wednesday morning 11-to-15-day outlook said, “The latest 11-15 day period forecast is warmer over the coast of the West-Southwest while colder over the Southeast. Confidence in the forecast is near to above average due to good large-scale model guidance agreement. Portions of the southeastern U.S., including the Tennessee Valley, could still run colder than the forecast, while the Southwest could be warmer.”
Some analysts think the market’s reaction to the weather forecasts is misplaced. “This market continues its errant ways as the temperature factor has shifted enough in a bullish direction to trigger another strong bout of short-covering by the funds. The temperature factor took on a bullish appearance over the past weekend as below-normal ideas that covered the western half of the U.S. were extended into the Midcontinent region,” said Jim Ritterbusch of Ritterbusch and Associates in comments to clients.
“Additionally, a current blast of cold air that has brought subzero temperatures into the upper Midwest overnight appears to be offering support via expectations for a larger than normal storage withdrawal within next week’s data. Nonetheless, we are viewing the weather factor as subsiding in importance as this winter winds down and a seasonal supply trough that will be established at around the end of next month comes into clearer focus.”
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile said March futures may test Tuesday’s value area at $3.277-3.247 and eventually test $3.176-3.160. Saal was not specific in his timing, but typically, prior periods’ value areas are tested the next period.
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