A temporary, albeit modest, upcoming respite from frigid conditions took the wind out of the Northeast’s recent price spike sails Tuesday, causing citygates to plunge by more than a dollar in many cases. However, small gains remained in play for most of the rest of the market as cold temperatures continued to dominate the overall weather scene.
Most points were flat to about 20 cents higher. Losses ranged from a couple of pennies to about $1.10; outside the Northeast they were capped at about 35 cents.
January futures, which had seen a spike of 34.7 cents the day before, gave up about half of that Tuesday in expiration-day trading that sent the contract 17.6 cents lower to $5.814 (see related story).
Although Northeast temperatures will still be peaking only in the vicinity of freezing or less Wednesday, traders saw an opportunity to shed some of the region’s recent price premium that had seen high-end quotes reach the $10-11 range at three citygates Monday. It may be a very brief window of opportunity, however, as The Weather Channel said western areas of the Northeast could see snow showers as a new cold front moves into the region Thursday in time for New Year’s Eve.
A brief period of slight moderation in the Upper Midwest followed a return of bone-chilling conditions was indicated by the Northern Natural Gas bulletin board. A posting Tuesday, noting that the pipeline’s normal system-weighted temperature at this time of year is 17 degrees, projected averages of nine for Tuesday rising to 15 Wednesday and 20 Thursday before plunging to five on New Year’s Day. That almost certainly prompted the pipeline to issue a System Overrun Limitation in two zones starting Thursday (see Transportation Notes).
Other pipeline constraints and/or linepack changes were coming and going. PG&E will implement a systemwide low-inventory OFO Wednesday, and Kern River said it was expecting linepack to dip below the pipeline’s target minimum level Tuesday.
On the other hand, MRT and Florida Gas Transmission ended cold-related OFO-like restrictions Tuesday.
Tennessee left its OFO Action Alert in place, and three Spectra Energy pipes (Texas Eastern, Algonquin and Maritimes & Northeast) were still enforcing imbalance constraints.
While still cold with some lows continuing to reach the freezing area Wednesday, much of the South can expect to see comparatively moderate weather westward into the desert Southwest and Southern California. One doesn’t have to go very far north from there to encounter harsh conditions, though, with bottom-end temperatures predicted in the 20s in the lower Midcontinent along with some snow and in the teens in the Rockies.
A utility buyer in the South said his company was slowing storage withdrawals from previous rates in light of the continuing cold weather, he said, just in case the cold refuses to relent much later this winter. The utility is buying more swing gas than before until warmer temperatures arrived and it can step up storage use again, he added.
Because of the amounts of storage it was pulling during December, the buyer said he bought some January baseload supply to make up for it. He reported paying TGT index plus a penny for some gas, but picked up a later package at a slightly higher premium of index plus 1.75 cents Monday because of the Nymex strength that day. ANR Southeast was available at index flat, he said.
A Midwest marketer said his area was still experiencing “pretty good heating load” with temperatures in the mid 20s Tuesday afternoon. It will get a little warmer Thursday, and then much colder again, he said.
Normally his company buys monthly gas at last-day futures settlement basis, the marketer continued, but for January it is experimenting with index deals, paying index plus 2 cents into both Michigan citygates. He had been quoted basis at plus 31 cents, which would have equaled about $6.12. He said it will be interesting to see whether the index choice pays off in lower prices.
The National Weather Service (NWS) sees little letup in eastern cold next week. In its six- to 10-day forecast for the Jan. 4-8 workweek, except for normal readings in upper New England and the northern tip of New York state, NWS predicts above-normal temperatures for everywhere else in the eastern two-thirds of the U.S. The furthest deviations below normal are expected to range from most of Virginia through the South Atlantic states to about half-way down the Florida peninsula and into western Alabama. Above-normal temperatures are projected all along the West Coast inland as far as central Idaho and northwestern Montana in the north and into virtually all of Arizona in the south.
Analyst Ron Denhardt of Strategic Energy & Economic Research predicted the report of a 145 Bcf draw from storage for the week ending Dec. 25. In projecting a similar pull of 143 Bcf, SunTrust Robinson Humphrey’s Cameron Horwitz said he expected it to be considerably less than the previous report’s below-expectations withdrawal of 166 Bcf, principally due to slightly lower space heating demand (a 2% week-over-week decline in heating degree days) and a 1.5 Bcf/d week-over-week decline in gas-fired power generation demand.
Meanwhile, Stephen Smith of Stephen Smith Energy Associates looks for a 150 Bcf pull, saying that was down a bit from his original estimate of 154 Bcf.
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