The physical gas market overall on average Thursday was unchanged, but once the wide-swinging Northeast pipes that include Algonquin, Iroquois and portions of Tennessee are factored in, the picture changes to a loss of 21 cents. Most cash trades were completed before the 10:30 a.m EST release of storage data by the Energy Information Administration (EIA), but the 157 Bcf withdrawal was less than the market was expecting, and futures slumped. At the close March had dropped 14.3 cents to $3.163 and April was off 14.0 cents to $3.231. March crude oil fell 30 cents to $97.31/bbl.
Midwest buyers found that they had to buy gas ahead of cooler weather expected Friday. “It’s still pretty balmy…at 44, but tomorrow [Friday] is supposed to be a cold day,” said a Nebraska utility buyer. “It seems like our winter comes in days at a time. Today we won’t make our budgeted volumes, but Friday we will. We should do 120,000-130,000 Dt/d Thursday and maybe up to 150,000-160,000 Friday.
“We paid about $3.40 for gas on Northern, and we have been doing pretty good at getting gas out of storage. I think there will be a little cold next week and that will help us get gas out of storage. I’m hoping we can get below the point where we don’t have to pay any penalties,” he said.
Forecaster Wunderground.com predicted the high Thursday in Minneapolis of 32 would drop to 21 on Friday, below the normal high of 29. Chicago’s Thursday high of 39 was anticipated to slide to 28 Friday, also under its seasonal norm of 35.
Next-day gas prices firmed at Great Lakes and Midwest points. Quotes on Northern Natural Gas Ventura were up 4 cents to $3.38, and deliveries to Demarcation came in at $3.40, also up 4 cents. On Alliance Friday, deliveries were seen at $3.42, also up 4 cents and at Chicago Citygate next-day gas was up 4 cents as well to $3.42. At Dawn, gas for Friday was seen at $3.56, down 1 cent, and on Michcon Friday parcels were quoted at $3.43, higher by 2 cents. Friday gas on Consumers came in at $3.42, also up 2 cents.
By contrast next-day prices generally dropped at Northeast and eastern points as temperatures were forecast to exceed seasonal norms. Wunderground.com said Thursday’s high in Boston of 43 would rise to 45 on Friday, 6 degrees above the norm , and in New York City, Friday’s relatively balmy 52 was expected to ease to 48 Friday, still well above a normal high of 41. Philadelphia’s Thursday high of 46 was anticipated to reach 50 Friday, 9 degrees higher than its typical for this time of year.
Deliveries Friday at Algonquin Citygate fell $7.35 to $10.50 and on Tennessee Zone 6 200 L next-day packages tumbled $7.52 to $10.39. At Iroquois Waddington Friday, gas was seen off 18 cents to $4.26. Gas destined Friday for New York City on Transco Zone 6 fell 97 cents to $5.13, and deliveries on Tetco M-3 added a penny to $3.52. Gas on Dominion came in down a penny at $3.32.
Futures traders suggested that some cautious buying might emerge Friday as bottom pickers attempt to ride a modest rebound. “Once prices got under $3.21, that was the telltale sign prices were headed lower,” said a New York floor trader. “$3.13 to $3.14 was the place we expected the market to genuflect and it did although it was a weak close. I look for a half-hearted attempt to get it back over the $3.18 area, but if it fails to do that I think traders will lean on it [sell] but not take it below $3.13 as winter is not over yet. There is cold weather coming in over the weekend, and that is the incentive to do a little bottom feeding.”
Prior to the open Thursday, Addison Armstrong of Tradition Energy saw “revised weather forecasts indicating slightly colder weather than previously forecast next week in the West and central U.S. plus expectations of an above-average storage withdrawal…providing support for the market. But with slightly more than a month remaining in this winter’s heating season and more than ample supplies of gas in storage, gas prices are likely to come under increasing pressure.”
The question arose as to whether the market would revisit last year’s low of $1.902 reached in late April 2012 with storage levels only nominally below a year ago. Levels currently stand at 2,527 Bcf, and with six weeks left in the traditional withdrawal season, weekly withdrawals of more than 12 Bcf would take storage below last year’s plump ending inventory low of 2,455 Bcf reached in February.
The EIA in its Short Term Energy Outlook projects ending inventories of 1,996 Bcf at the end of March for an implied weekly withdrawal of 88 Bcf for the remainder of the season.
Analysts on Thursday were expecting a hefty pull in the EIA’s release of storage data. Last year, 113 Bcf was withdrawn, and the five-year average is for a hefty 154 Bcf draw. This week’s report surpassed those figures, but not by as much as expected. Tradition Energy forecast a draw of 169 Bcf, and IAF Advisors of Houston was looking for a 170 Bcf decline. A Reuters poll of 26 traders and analysts resulted in an average 162 Bcf, and Bentek Energy calculated a 165 Bcf pull.
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