Cash market quotes overall averaged nearly 13 cents higher Wednesday aided by a strong screen from the day before and weather forecasts calling for the first major incursion of cold air of the season. Midwest points and those locations expected to feel the brunt of the late-week cold experienced gains upward of 20 cents, but Gulf and California advances were more modest. At the close of futures trading November had skidded 8.5 cents to $3.450 and December had slipped 8.5 cents also to $3.776. December crude oil continued lower losing 94 cents to $85.73/bbl.

Next-day gas prices surged in the Midwest as traders braced for near-term weather that was likely to send temperatures into a double-digit decline as a cold air mass descends on the mid-section of the country.

“A strong cold front is poised to move through the [Midwest] region through Saturday [with] showers and thunderstorms occurring with the front as it moves eastward,” said Tom Moore, meteorologist at The Weather Channel. He added that “Temperatures [will] remain quite warm ahead of the cold front with highs in the 70s and 80s, [h]owever, behind the front temperatures tumble 20 to 40 degrees with highs mainly in the 40s and 50s, although a few areas could remain in the 30s in the northern Plains. Some light snow Thursday [is possible] from eastern SD to northwest MN.”

Tom Skilling, meteorologist at the Chicago Weather Center, forecast that highs in the Windy City Wednesday of 80 would ease to 78 by Thursday before plunging to 57 on Friday and 47 on Saturday. As the front approaches Skilling said to expect a 23-degree temperature drop once it passes and winds could be as high as 18 mph. By Friday lows in the suburbs could drop into the mid to upper 20s and downtown could see lows in the 30s.

Quotes on Michcon soared 19 cents to average $3.67 and Thursday deliveries into Consumers jumped 24 cents to $3.70. At the Chicago Citygates Thursday gas added 23 cents to $3.64 and on Alliance next-day deliveries added 22 cents to $3.63. Dawn quotes rose 17 cents to $3.76.

The surge in prices caught some buyers off guard. “We were going to buy more gas, but the price didn’t look all that appealing so we didn’t buy as much as we thought,” said a Michigan marketer. “We had to pay $3.72 on Consumers, and yesterday [Tuesday] we only had to pay $3.48. Talk about a big hike!”

The marketer suggested that the day’s purchase on Consumers may have been indexed to the November futures, whereas the earlier purchase might have been relative to the expired October contract.

The marketer was circumspect about storage plans for the remainder of the season but said “it’s always wise to have storage to cover yourself for unforeseen events. You don’t ever want to be short and have to use the utility’s gas because the penalties can be high. You pay $10/MMBtu plus their price of gas for each MMBtu you use. You definitely don’t want to go there.”

West Coast prices were not quite so inspired. Thursday deliveries to Malin averaged $3.60, 12 cents higher and deliveries to the PG&E Citygate were up a penny at $4.01. SoCal Citygate quotes were also up a penny to $3.72 and deliveries to SoCal Border locations were higher by 6 cents to $3.61. On El Paso S Mainline next day gas gained 8 cents to $3.63.

Most Gulf locations tacked on double digits. ANR SE was up by 12 cents to average $3.41 and the Henry Hub was quoted at $3.43, up 9 cents. Deliveries to Tennessee 500 L gained 11 cents to $3.45 and gas at Transco Zone 3 came in 13 cents higher at $3.44.

Futures trading was uninspired. “We went out on the lows of the day, but there was not much action at all,” said a New York floor trader. “Prices fell steadily throughout the day, and we are expecting a [storage] number between 66 and 68 Bcf. There’s really nothing to hold the market up. Traders are thinking $3.40 support and $3.35 underneath that so they are just hanging out and seeing what the number is Thursday.”

Traders and analysts will be putting the finishing touches on their estimates for season-ending storage gas with the 10:30 a.m. EDT release of data from the Energy Information Administration. Last year a stout 95 Bcf was injected and the five-year average stands at 65 Bcf. IAF Advisors of Houston predicts a 66 Bcf fill and a Reuters survey of 26 industry analysts showed an average 67 Bcf with a range from 55 to 77 Bcf. Bentek Energy is looking for an increase of 69 Bcf.

Tuesday’s 8-cent gain gave some reassurance to the bulls, but market technicians aren’t convinced that prices will continue to head immediately higher from here. “While it is possible that $3.426 competed an ABC decline from $3.638, we are not convinced,” said Brian LaRose, a market technician with United ICAP. “What will it take to change our tune? A decisive break above $3.660-3.692 will do the trick. Barring that, an ABC decline from $3.638 should be anticipated. Our downside targets in this case: the A=C objectives from $3.648 cuts at $3.337; 1.618 [of A=C] targets $3.2600-3.243-3.200,” he said in closing comments to clients.

Forecasters see little change in the overall weather picture. MDA Information Systems in its six- to 10-day outlook predicts below- to much-below-normal temperatures along a ridge trending from North Dakota to Florida. The desert Southwest is expected to be above normal. “The big picture has changed little within this time frame, with changes again limited to the details. The main focus here is still on the potential for a significant storm system to impact the Mid-Atlantic and/or Northeast as energy trekking eastward towards the coast phases with Tropical Storm Sandy.

“This phase will also help a cold trough to deepen over the Eastern U.S., providing stronger cold from the Mid-Atlantic to Southeast in the form of widespread much-belows [normal temperatures]. Aboves will mostly be limited to the Southwest as the -NAO [North Atlantic Oscillation] block should limit the eastward progression of this warmth.”

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