With a few instances of flat to modestly higher numbers sprinkled here and there, most of the cash market recorded small losses Friday in a muted reversal of the advances that had thoroughly dominated trading earlier last week. A large majority of the drops were in single digits. Northeast citygates, having much greater heights from which to fall, tended to see all of the larger declines ranging from a little more than a dime to as much as $1.30 or so.
It wouldn’t be much of a respite, but the Midwest and Northeast were slated to get a slight moderation in cold temperatures during the weekend. That, along with the slump in industrial load that typically accompanies a weekend and the cessation of day-earlier screen support that had helped boost cash quotes in the previous two days, were cited as the chief factors in the overall weekend softness.
However, it wouldn’t be surprising if an uphill price trek resumes Monday, at least in the East. New cold fronts, accompanied by snow in many areas, were forecast for early this week not only in the Midwest and Northeast, but also in the South. In addition, after March futures limped off the board Thursday with a loss of less than a penny, the April contract made its prompt-month debut Friday with an impressive advance of 26.1 cents, which, combined with the return of industrial demand, should give some boost to Monday’s numbers.
A couple of sources expressed puzzlement about the screen’s behavior in light of a mostly softer cash market. “Why in heck was Nymex so strong today?” asked one. About the only rationale that could be offered was futures traders setting their sights on the anticipated resumption of winter storms in eastern markets this week (see futures story).
Despite the forecasts for new storms in the Northeast, a regional utility buyer said his local area was expected to see “relatively normal weather, nothing severe” this week.
A Calgary-based producer said weather in his Midwest market area would moderate a little over the weekend, but would not get “that much warmer.” To him, the weather was actually “kind of a non-event” outside the Northeast last week because there were no constraints on moving gas to the Midwest. He noted that with July futures trading close to $6.90 Friday, “most people would be happy to buy Chicago around $6.30 [Friday’s spot average] now and keep it [in storage] until then” for resale.
Brushing aside last week’s cold weather in northern market areas and the prospects for more this week, the producer proclaimed that he was “one of the ones that says winter is over. The only market with possible price spikes left is the Northeast, and that’s primarily because it’s transport-constrained.”
However, Weather 2000 tried to reinforce the idea that it’s a bad idea to dismiss the winter effect on gas markets prematurely. In a midweek advisory, it insisted on setting the record straight: “The coldest Marches ever can’t hold a candle to the coldest Februarys, let alone coldest Januarys of all time, but March 2005 could be one for the March ages” if current scenarios persist. “We are already two full months removed from the shortest days of the year, so the increased solar radiation makes it a very difficult task for the atmosphere to match the level of frigidity that we witnessed last month, for example. However, double-digit [temperature] departures are fair game, and unlike the more focused shots of arctic air in January 2005, literally the majority of contiguous U.S. surface area could be under the colder-than-normal gun” during March. The consulting firm concluded, “We advise waiting until Easter comes and goes before anyone turns their back on winter’s home stretch.”
A Lower Midwest utility buyer reported the market was “pretty quiet, and it’s beautiful weather here.” His company is still coasting through the winter on storage and term contracts, so he didn’t buy any new gas for March. In fact, it may be hard pressed to use up all of its available supplies during March, he added.
Most bidweek business got wrapped up Friday, if not earlier, leaving little to be done Monday. Most late prices were considerably higher than where they started the week, a producer noted. For example, March Chicago citygates ended near $6.50, about even with Henry Hub, after beginning just a tad below $6. However, most Chicago business gets set up early, he observed, so there wasn’t much volume traded at the late higher prices. He reported selling at the citygate at basis of minus 3 cents last Tuesday, but said basis had moved as high as plus 20 cents Friday based on the screen’s strength. He anticipates a Chicago index around the mid $6.20s.
Citigroup analyst Kyle Cooper made an initial estimation of a withdrawal in the vicinity of 115 Bcf to be reported for the week ending Feb. 25. “Unfortunately, there is again a lot of disparity between the models, and our final estimate may be dramatically different [from] this early indication.”
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