Thanks to volatile Northeast gas prices, the national average for physical natural gas traded Thursday for Friday delivery dropped nearly 50 cents.
Snow and cold were forecast to rake the Midwest, but a forecast moderate warming trend along the Eastern Seaboard was enough to send next-day prices from New England to the Mid-Atlantic spiraling lower. The Energy Information Administration (EIA) reported a storage pull of 127 Bcf, which was greater than expectations but not enough to keep the bears at bay. March futures fell 3.3 cents to $3.246, and April lost 3.3 cents as well to $3.298. April crude oil continued to implode, losing $2.38 to $92.84/bbl.
Midcontinent producers reported that long-awaited winter weather has finally prompted local demand and firmed prices. “We finally got some load and have been selling to local utilities,” said an Oklahoma producer.
“We finally got some sales going, so we were able to sell on OGT [Oklahoma Gas Transmission] at $3.22. There haven’t been many restrictions with the exception of Enogex and the intrastate market has been strong. As long as that is the case we don’t have to worry about selling on NGPL or Panhandle or any of the major interstate pipelines.”
Temperatures in Oklahoma Friday were forecast to plunge to almost 20 degrees below normal. AccuWeather.com predicted the high in Tulsa Thursday of 47 would drop to 37 Friday, well below the seasonal high of 55. Oklahoma City’s Friday peak of 44 was expected to drop to 38 Friday, 17 degrees below its normal high.
Next-day gas, however, on major interstate pipelines declined. ANR SW eased 8 cents to $3.24, and deliveries on NGPL Midcontinent Pool shed 7 cents to $3.24. On OGT Friday gas was quoted at $3.21, 8 cents lower, and on Panhandle Eastern Friday parcels came in at $3.22, 8 cents lower.
A warming trend forecast for the East sent prices for Friday gas scurrying lower. The National Weather Service in New York City said “high pressure moves over the region on Friday. Low pressure will develop off the middle Atlantic coast on Saturday passing southeast of Long Island Saturday night. High pressure builds in again on Monday followed by another frontal system late Tuesday into Wednesday.”
Temperature-wise, AccuWeather.com forecast that the high in Boston Thursday of 34 would rise to 38 Friday before reaching 39 on Monday. The normal high in Boston this time of year is 40. New York City’s Thursday high of 34 was expected to reach 37 Friday and 45 by Monday. The normal high in New York is 43. In Philadelphia, Thursday’s high of 37 was forecast to reach 40 by Friday and 48 on Monday. The seasonal high in Philadelphia is 45.
Quotes for gas at Algonquin Citygate fell $6.41 to $10.14, and on Tennessee Zone 6 200 L next-day deliveries were seen $6.98 lower at $9.54. Upstream at Iroquois Waddington gas for Friday was quoted 74 cents lower at $4.05.
On Dominion gas for Friday was seen 8 cents lower at $3.34, and on Tetco M-3 Friday packages came in 45 cents lower at $3.68. Gas, however, on Transco Zone 6 into New York City plummeted $11.52 to $5.69.
Futures traders see prices stuck in a range in spite of the day’s decline. Prices initially advanced off a supportive EIA inventory report but couldn’t hold on to the gains. “You had cautious longs who bailed out with the weaker longs,” said a New York floor trader.
“The market did get up to $3.33, but that is resistance. [Technical] support is at $3.21 to $3.23, $3.16 to $3.18 and underneath that at $3.08 to $3.12. It looks like the market wants to hold here and give a shot to the upside.”
Market pundits of late have been somewhat chagrined by their inability to forecast the weekly storage withdrawals, but this week some were granted redemption. “It’s been a particularly difficult few weeks; EIA coming in far lower than the market for the past three weeks has everybody doing a bit of a scramble,” said John Sodergreen, editor of Energy Metro Desk (EMD) and publisher of a weekly storage survey.
He says he’s been able to nail the bias in the reports fairly well, “but we note that the various market surveys are taking a serious beating this quarter, and ours is no exception.
“This week, however, we note the range of forecasts is tight; the range between categories we track is less than 2 Bcf, and the standard deviation is an unseasonably low 3.7. Some folks feel the risk is to the high side this week (a higher pull than the market would believe), and our editor is one of them [127 Bcf].”
For the week ended Feb. 15, the EMD survey average of 36 participants was at 125 Bcf with a range of 116-132 Bcf. A Reuters survey of 20 traders and analysts revealed a 122 Bcf decline. Bentek Energy predicted a pull of 122 Bcf. Last year, 155 Bcf was withdrawn and the five-year average is for a 140 Bcf pull.
Inventories now stand at 2,400 Bcf and are 242 Bcf less than last year at this time and 361 Bcf more than the five-year average. In the East Region 79 Bcf was withdrawn, and in the West Region 13 Bcf was pulled. Inventories in the Producing Region declined by 35 Bcf.
The Producing region salt cavern storage figure dropped by 9 Bcf from the previous week to 225 Bcf, while the non-salt cavern figure declined by 27 Bcf to 699 Bcf. The EIA first split Producing Region facility types in storage report footnotes in March 2012 in an effort to give analysts and industry more comprehensive information on the relationship between natural gas inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
Addison Armstrong of Tradition Energy saw traders attempting to balance “the approaching start of the slack demand shoulder season and record production levels of gas against remaining winter heating demand and the more than 15% of idled nuclear power plant capacity. Weather forecasts are little-changed from yesterday [Wednesday], with normal to below-normal temperatures expected across much of the East in the next 10 days, followed by a slight shift to well below-normal temperatures during the beginning of next month.”
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