Physical gas prices continued to advance Wednesday, posting an average gain of 12 cents overall. Multi-dollar gains permeated eastern delivery points, and Midwest locations also were firm. At the close of trading February futures had slipped 2.0 cents to $3.435 and March was down 1.6 cents to $3.437. February crude oil added 96 cents to $94.24/bbl.
Prices in the volatile Northeast continued to shoot higher as near-term temperatures were forecast to rise moderately Thursday then fall by Friday, as a storm system raked the area. “The caboose in a train of storms is forecast to swing northward at the last minute, spreading a swath of snow to some coastal areas in the mid-Atlantic and New England before the end of the week,” said AccuWeather.com meteorologist Alex Sosnowski.
“The strongest of three storms in the train will swing up from the South just enough to spread heavy snow from the southern Appalachians to central North Carolina and a large part of Virginia later Thursday into Thursday evening. For part of this region, this will be the first significant accumulation of snow of the season.”
By Friday temperatures were expected to be nominally below seasonal norms. According to AccuWeather.com, Wednesday’s a high of 36 in Boston was forecast to rise on Thursday to 42, then slide Friday to 29. The normal high in Boston is 35.
In New York City, Wednesday’s high of 39 was seen advancing to 43 Thursday then dropping to 31 on Friday. The seasonal norm for New York is for highs of 38. Philadelphia’s 42 high on Wednesday was forecast to rise by one degree on Thursday before falling to 34 Friday. The normal high in Philadelphia is 40 at this time of year.
Next-day power prices continued to provide a firm undertone to the market. Day-ahead locational marginal prices at the New England Power Pool’s Massachusetts Hub gained a stout $11.55 to $71.80/MWh and Thursday deliveries to the New York Independent System Operator’s Zone G pool (eastern New York) rose $13.80 to $63.80/MWh.
Gas into the Algonquin Citygates jumped $1.64 to $8.98, while deliveries to Tennessee Zone 6 200 L were up $1.65 to $8.95. At Iroquois Waddington Thursdaym gas quoted at $5.73, higher by 33 cents.
To the south next-day gas staged more modest gains. On Dominion Thursday deliveries came in at $3.37, unchanged, and Tetco M-3 was at $3.81, up 11 cents. Gas into New York City on Transco Zone 6 climbed $1.23 to $5.92.
Midwest buyers reported a slowdown in the rate of their purchases. “It’s 50 degrees out here and we are buying only about 120,000 Dt. It’s not a good sale day at all,” said a Nebraska utility purchaser. “You can’t sell gas when its 50 degrees out, but we are going to have a cold weekend. We get little spurts of winter here and there.”
This weekend, he said, was expected to be a “pretty good blast with temperatures down around zero.” If that were the case, their volumes could move as high as 300,000 Dt, the buyer said.
“We are going to pull as much gas as we can out of storage but Northern has started to allocate storage withdrawals because of operational factors. I don’t know how much more room we have to pull more than our firm entitlement. That entitlement gets less and less into the spring,” he noted.
“We’ll be buying all week on the spot market into this cold snap. We had to pay $3.50 on Demarcation” Wednesday.
At Northern Natural’s Ventura delivery pointm next-day gas was quoted at an average $3.57, up 4 cents and at Demarcation Thursday parcels were seen at $3.56, up a couple of pennies. On Alliance gas was 3 cents higher at $3.57, and at the Chicago Citygates quotes came in at $3.56, up about 4 cents.
Futures traders noted a belated effort by the market to reach positive territory. “We were trading around $3.39 to $3.41 for the longest time. It was down as much as 9 cents and rallied back,” said a New York floor trader. “In my view this would be a good place to sell. We’ll see what Thursday’s storage number brings, and factor that in, but we are expecting a withdrawal of 136 Bcf to 142 Bcf. There is no bullish sentiment in here at all.”
Others are right in line with the floor trader’s estimate. ICAP Energy calculates a withdrawal of 138 Bcf and a Reuters poll of 23 traders and analysts showed a 136 Bcf average with a range of 121 Bcf to 156 Bcf. Bentek Energy sees a pull of 146 Bcf.
Weather forecasts for next week continue to call for substantial cold temperatures from the Mississippi Valley eastward. Commodity Weather Group (CWG) in its six- to 10-day forecast shows below- to much-below-normal temperatures from North Dakota to Maine, and East Texas to Georgia. For the most part, the West is normal to above-normal.
“Next week’s mammoth cold air outbreak continues to be the biggest feature on the forecast horizon, and the models are experiencing difficulty seeing what happens beyond it,” said CWG President Matt Rogers. “We are watching some major model disagreements showing up as early as days nine-10 now between the usually more reliable American and European ensembles. The European ensembles introduce a weak, secondary cold push around this time, while the American models continue to progress the warmer 11-15 day trends forward.”
Top traders have deftly navigated the recent decline and are looking once again to sell. “Fundamentally, not much has changed in the gas market,” said DEVO Capital President Mike DeVooght. “We do feel the highest probability is for the gas market to continue to trade in the $3-4 range over the next few months. We covered our short positions last week and will now look for a substantial rally ($3.60-4.00) to resell this market.”
DeVooght counsels trading accounts and end-users to stand aside, but producers and physical market longs are advised to hold the balance of a winter strip established earlier at $3.75-3.95. Should any of the remaining winter months trade above $3.75-3.95, he advises a “light position.”
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