With temperatures beginning to see fall-like conditions again in the South and Midcontinent, and only occasionally lows getting much below freezing outside Canada and U.S. areas near the northern border, prices fell at nearly all points Tuesday. The previous day’s drop of 11.3 cents by January futures also played a role in depressing the cash market.
Increases of a couple of pennies at Sumas and nearly C10 cents at Westcoast Station 2 were the sole exceptions to losses ranging from a nickel or so to about 65 cents. The Northeast, where temperatures are slowly climbing following a weekend blizzard from the Mid-Atlantic into New England, saw most of the largest declines but still averaged prices that were well above numbers elsewhere.
January futures added scant support to Wednesday’s spot market by rising 4.6 cents Tuesday (see related story).
The market’s overall weakness occurred despite a “potent winter storm that will eventually impact the entire country” bringing areas of heavy snow to the West Tuesday, The Weather Channel said. Remnants of the weekend’s heavy snow conditions along much of the East Coast also failed to support gas prices. One reason was that highs in the 50s, 60s and occasionally even the 70s were returning at least temporarily into the South and part of the Midcontinent.
Rockies quotes failed to see any traction from lows due to a sink into single digits Wednesday.
A utility buyer in the Lower Midwest said her area was “thawing a little” but would remain around freezing through Thursday. However, the Christmas weekend forecast was for near-zero with more snow, she said, which wasn’t personally pleasant but good for company business. Sales have been good this month, she said, with the utility already having flowed more gas by Dec. 15 than it did during all of November.
It’s fairly likely that Northern Natural Gas will declare a new System Overrun Limitation during the weekend, the buyer said. That may make it more difficult to schedule flows during the holiday period, she said, “but that’s why we’ve got cell phones.”
A Midcontinent producer said it was “not all that cold” for late December in Oklahoma. Cash prices were down near the end of Tuesday’s trading, he said, which was partly a response to morning Nymex weakness before January futures made an upturn in the afternoon. A “white Christmas” was almost certainly out of the question for Oklahoma, he said, but the state should experience colder conditions than it did Tuesday.
Storage spreads are not what they had been earlier, he said; they had been pretty wide between futures values and current cash numbers a couple of months ago but have tightened considerably since then.
Contrary to the perceptions of some, the producer said he was surprised that market liquidity was remaining fairly strong despite holiday vacations by some trading counterparties.
Sunny weather Tuesday was “still cold but not all that bad,” said a marketer in the Upper Midwest. However, the forecast didn’t indicate any further warm-up before the end of the month at the earliest, he said.
Ron Denhardt at Strategic Energy & Economic Research said he expects a 165 Bcf withdrawal from storage to be reported for the week ending Dec. 18. SunTrust Robinson Humphrey analyst Cameron Horwitz projects a significantly larger pull of 182 Bcf, saying he attributes the lower sequential withdrawal from last week’s report of 207 Bcf to a 4% week-on-week decline in gas-weighted heating degree days, which resulted in less space heating demand.
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