Winter hasn’t exited the seasonal weather stage quite yet, but looks like it might be getting ready for its final curtain call. Most of the coldest remaining temperatures are in northern New England and ranging from the Upper Plains through the Rockies.
Thus most western points and a few scattered ones in the East ranged from flat to up about a dime Monday, while the rest of the market fell anywhere from a couple of cents to about 20 cents.
A couple of traders almost echoed each other in saying something to the effect of “there’s absolutely nothing happening” in the physical market currently. The ending of OFO-like constraints by Florida Gas Transmission and Northern Natural Gas (see Transportation Notes) left nothing in the way of meaningful pipeline carriage issues. Even FGT’s Overage Alert Day notice, as meek as it was on imbalance tolerances, is gone now, said a Florida utility buyer.
A winter storm bringing snow to parts of the Plains and Midwest Monday was on its way out, leaving temperatures that were expected to average close to seasonal for early March on Tuesday, according to The Weather Channel. A new Pacific Northwest storm was moving southward towards California, but it would not be nearly as wet and/or snowy as last week’s severe event, TWC said. And unlike most of 2004’s southern cold fronts so far, the one halted Monday afternoon in southeast Texas and North Louisiana would stall out across the South instead of sweeping completely through, which the forecasting service said “is definitely a sign of spring and the returning warmth.”
All in all, not very supportive weather fundamentals for gas prices. An East Coast utility buyer and a marketer concurred that they didn’t see any major changes in weather on the horizon, “although you never can tell with forecasts,” as the utility staffer said.
But with little else of interest in cash gas, many sources focused Monday on impressive advances throughout Nymex’s energy futures complex. An initially negative gas screen eventually wound up with a gain of more than 13 cents on the day, with the turnaround credited almost entirely to strength across the petroleum products markets.
Crude oil for April delivery settled just 14 cents shy of $37/bbl. Heating oil and unleaded gasoline at New York Harbor also spiked, boosted at least partially by supply worries exacerbated by closure of the Mississippi River’s opening into the Gulf of Mexico to shipping for part of last week. The setback to Louisiana refinery operations occurred with the start of summer driving season just down the road, so to speak.
Kyle Cooper, a Citigroup analyst, pegged his final estimation for this week’s storage report as a draw of 110-120 Bcf. “The withdrawal needs to only be greater than 89 Bcf to place inventories on track to drop to 1,000 Bcf,” Cooper added. “Our end-of-season estimate is between 900 and 950 Bcf. Our bearishness has been tempered, but we are not yet bullish.”
Ron Denhardt of Strategic Energy & Economic Research weighed in with a preliminary forecast of a 118 Bcf pull for the week ending Feb. 28. “Weather-adjusted working gas storage withdrawals continue to indicate that the supply-demand balance has tightened since January,” he continued. “Gas prices are now well below distillate. We estimate that up to 1.7 Bcf/d of industrial gas demand could have returned at these prices compared to last year.”
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