The market remained unable to find enough heating load to keep prices from dropping further at most points Thursday. Anecdotal evidence from one buyer suggested that increased use of storage to supplant new purchases of spot gas by utilities and end-users is part of the reason that prices have been weak for the most part over the past two days in the face of very cold weather returning to many regions. Futures weakness from the day before continued to be a drag on cash numbers.
Mixed price direction was still in play as several points, mostly in the Midcontinent and West, were flat to about 15 cents higher. Declines ranged from 2-3 cents to a little more than $1.25, and Northeast citygates again turned in the biggest losses despite a snowstorm that was bearing down on the region from the Mid-Atlantic.
Forecasts indicate that a holiday weekend surge in frigid conditions will prove too great for the cash market to resist a rebound at most, if not all, points Friday. Although AccuWeather.com said the storm approaching the Northeast will not be as intense as the Nor’easter that slammed New England last Monday, it will pull “very cold air” into the region.
While the storm that dumped snow into the eastern South earlier this week moves on up the East Coast, a new one will begin to organize in the western Gulf of Mexico Friday. It will contribute mostly rain at first, but that will be changing more to snow as it moves into the South’s east end going into the weekend, The Weather Channel said.
By Saturday nearly all of the U.S. and Canada will be in the deep freeze, with snow impacting many areas.
Even with a low of zero forecast for Friday, the Chicago citygate was flat Thursday. Michigan citygates were down as much as a dime with a low around 15 predicted for Detroit.
The Rockies saw either flat quotes or small losses as severe cold continues there. Denver will see a third straight day of bottoming out around 8 degrees Friday, according to Madison, WI-based Weather Central. Kern River was reporting low linepack systemwide Thursday.
Several pipelines are adding to the list of OFOs or OFO-like service constraints that are being implemented due to forecasts of severe winter weather in their service areas (see Transportation Notes).
Northern Natural Gas extended a System Overrun Limitation for all market-area zones into its second day Friday, and it was hardly surprising that Northern’s Ventura point rang up Thursday’s largest gain while demarc added a couple of pennies. A bulletin board posting Thursday said the normal system-weighted temperature at this time of year is 15 degrees but projected averages of 9 Thursday sinking to minus 1 Friday, minus 6 (!) Saturday and minus 2 Sunday.
The Energy Information Administration matched consensus expectations in estimating a 59 Bcf storage withdrawal for the week ending Jan. 11. It was ho-hum news to Nymex traders, who sent February natural gas futures another 5.2 cents lower Thursday.
A utility buyer in the South said his company is “trying to pull storage as hard as we can.” So far the winter has been fairly mild in his area for the most part, causing his utility to fall behind in its withdrawal schedule, he said. The upcoming cold snap will help it meet a tariff-mandated storage level target by March 31. “We’re not buying any swing gas if we can help it and actually sold some recently for a few days while prices were above index,” he said, which helps to draw down storage more quickly. Saturday looks like the coldest day of the holiday weekend, he said.
The “real cold” hadn’t gotten to her area yet, a Midwest marketer said Thursday afternoon, “but we’re expecting sub-zero wind chill factors” during the weekend. She noted that Vectren and Michigan Gas Utilities were adding their own OFOs to those of the interstate pipes. Having so many OFOs in effect will present a challenge in making purchases Friday and managing gas flows over a long holiday weekend, she added.
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