Tuesday’s futures gain of more than half a dollar proved to have more support for the cash market than a couple of sources had expected. Prices were up Wednesday at a majority of points, although nearly all of the rally was based in the East, where it got a little help from slight trends toward colder weather in the Midwest and Northeast market areas.
Advances were fairly moderate, being capped at a little less than 20 cents except for one point that registered a gain of nearly 30 cents. The Midcontinent and West tended to see quotes ranging from flat to about 30 cents lower; an NIT (NOVA Inventory Transfer) uptick of about C10 cents was a western exception. The Rockies cornered the market on the largest losses.
As the screen giveth, so it is likely to taketh away, especially in light of bearish weather and storage fundamentals. The March natural gas contract yielded most of the price ground it had gained the day before in falling 44.8 cents Wednesday as it began the three-day countdown to expiration.
The Northeast and Midwest could claim a modicum of heating load with light snows due Thursday, but temperatures were expected to be no worse than seasonal. However, the Northeast can look forward to much colder weather by the end of the weekend, The Weather Channel (TWC) said. Most of the South will bask in conditions that more closely resemble spring than late winter, while wintry weather will largely remain confined to the northerly mountain areas of the West, TWC said.
Southern Natural Gas has made great strides in recovering from hurricane-induced supply shortfalls recently — so much so that it has essentially matched pre-Katrina throughput in the last couple of days, according to Golden, CO-based Bentek Energy. Its analysis of pipeline flow levels shows that Southern had 870 MMcf/d of throughput scheduled Tuesday and 860 MMcf/d Wednesday; that compares to a volume of 869 MMcf/d last Aug. 26 as shut-ins were just beginning with Katrina approaching, Bentek said.
Minerals Management Service (MMS) said 47 companies reported 1,504.10 MMcf/d Wednesday in remaining Gulf of Mexico production shut-ins that resulted from Hurricanes Katrina and Rita last year. That was 49.58 MMcf/d less than the report two weeks earlier. Cumulative deferred production since last Aug. 26 now totals 652.629 Bcf, equivalent to 17.88% of the Gulf’s normal annual output of about 3.65 Tcf, MMS said.
Daily trading was fairly routine Wednesday, said a Calgary-based producer. The Chicago area is currently seeing daily highs above freezing and lows below freezing, which is fairly typical for late February. Things will get colder toward the weekend and thermometer levels will be a little below normal, “but nothing crazy,” he said.
The producer said he was seeing a reasonable volume trading Wednesday for March, calling it “about an average start” to bidweek; that is, a little slow. He reported seeing Chicago citygate basis average minus 20 cents for Nicor but “a little weaker” at NIPSCO and Peoples. All the citygates seem to have minor issues of some type going into March, he said; they usually trade about a penny apart but it was looking more like nickel spreads Wednesday.
A utility buyer in the Lower Midwest said his company was still covered by winter term contracts through March, so he was not participating in bidweek. But with “everybody” having so much storage to get rid of, including the utilities, he was pretty sure there are a lot more baseload sellers than buyers. The area had warmed up since the weekend to more than 50 degrees Wednesday afternoon and was due to see almost 60 Friday before cooling down to the 40s over the weekend, he said. Even the 40s would still be warmer than normal and keep throughput light, he said.
Global Insight’s Jim Osten expects a withdrawal of 104 Bcf from storage to be reported for the week ending Feb. 17. Going further out, he projects a pull of 110 Bcf for the current week ending Feb. 24. Kyle Cooper of Citigroup made a final estimation for a draw of 122-132 Bcf for Thursday morning’s report.
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