Physical natural gas prices on average lost a whopping 36 cents Friday as the normal reluctance of buyers to commit to weekend gas was compounded by a weak screen, near-record gas in inventories, forecast warmth for the upcoming week in major energy markets and reports of ever-higher domestic production.
The Northeast was especially weak, with multi-dollar drops, but the East and Midwest were soft as well. At the close of futures trading January had lost 8.7 cents to $3.561 and February was down 8.4 cents at $3.584. January crude oil added 84 cents to $88.91/bbl.
Northeast points led the race downhill with a multiple-dollar price drubbing at some locations. “It’s going to be cold this weekend, but then it warms up,” said a northeast marketer on Friday. He added that there were a number of “small residential guys [marketers] that were way long because of the [earlier] heat and they were selling in a big way on the Sunday and Monday packages. There will be lots of gas hitting the market, and people are set up differently for December. A lot of people who were short aren’t going to be short.
“The LDCs will be long gas, and they have a lot of options they didn’t have in November. Usually there isn’t that much flexibility in November because you don’t need the gas. December can be really fickle, and a lot of demand goes away at Christmas,” the marketer said.
Near-term weather in New England was expected to be chilly, but by the start of the week temperatures were anticipated to be well above normal.
“A mix of flurries and freezing drizzle will spread over the region late Friday night into Saturday as a weak disturbance moves through. The immediate south coast should receive plain drizzle with temperatures remaining above freezing,” said AccuWeather.com meteorologist Tyler Roys. “Any icy spots will quickly diminish on Sunday as warmer air moves into the region. Temperatures will rise into the mid-50s. The warmth will linger for the start of next week, with temperatures rising even higher, reaching close to 60 degrees. A cold front will bring temperatures back to around 40 degrees for the midweek.”
Friday’s high in Boston of 33 was forecast to reach 56 on Sunday and Monday, 9 degrees above normal. Hartford, CT’s high of 38 on Friday was predicted to give way to 56 on Sunday and 58 on Monday. The seasonal high in Hartford at this time of year is 46.
Weekend and Monday gas at Algonquin Citygate plunged $3.88 to $6.10, and deliveries to Tennessee Zone 6 200 L dropped $3.86 to $5.87. Parcels on Iroquois Waddington fell 95 cents to $5.15.
Farther south prices also weakened. Gas on Dominion came in 25 cents lower at $3.48, and on Tetco M-3 weekend and Monday gas fell about 28 cents to $3.69. Gas bound for New York City on Transco Zone 6 tumbled 56 cents to $3.87.
Price declines across the Great Lakes weren’t quite as severe. Weekend and Monday gas at the Chicago Citygates dropped 15 cents to $3.57, and deliveries on MichCon skidded 15 cents to $3.68. On Consumers, gas prices slipped 15 cents to $3.71, and on Alliance weekend and Monday gas shed 15 cents to $3.59. Deliveries to Dawn fell 13 cents to $3.94.
The soft tone to the market was supported by reports of higher production. Lower 48 U.S. natural gas production during September increased by 0.6%, or 0.45 Bcf/d, from August and was up by nearly 3.9%, or 2.73 Bcf/d, from a year ago, according to the most recent data from the Energy Information Administration (EIA). September production was 73.05 Bcf/d.
The agency’s Monthly Natural Gas Gross Production Report showed that the “other states” category charted the largest sequential increase at 1.9%, or 0.43 Bcf/d, thanks to new wells coming online in the Marcellus Shale and other plays, EIA said (see related story).
Futures traders are wary that weekends can always bring significant changes to weather forecasts.
“Although we are not seeing any noticeable shift in the one- to two-week temperature views that extend toward mid-December, we do expect support [Friday] off of short-covering/profit-taking ahead of a weekend that could bring some major shifts to the weather outlook. Last weekend’s dramatic shift toward mild temperature forecasts is fresh in the memory of traders, and a swing in the opposite direction is certainly a possibility during the next couple of days,” said Jim Ritterbusch of Ritterbusch and Associates.
“Nonetheless, price gains will be restricted for awhile by some downsized storage withdrawals that will likely be issued by the EIA during the first half of December. While this week’s price plunge has been substantial at roughly 10% from last Friday’s close to the overnight lows, the process of offsetting this decline could take a few weeks unless a major change in the temperature views is forthcoming,” he said in morning comments to clients.
WSI Corp. of Andover, MA, in its six- to 10-day outlook shows much above-normal temperatures extending from New Mexico to Wyoming and above-normal temperatures from the Ohio and lower Mississippi Valleys as far west as Nevada. “[Friday’s] forecast is slightly cooler for much of the western and north-central U.S. The Deep South-Southeast is somewhat warmer. There is still a warm risk in the forecast during the six-10 day period for the East Coast through Deep South-Southeast,” the forecaster said. “Confidence is considered average. There is reasonably good large-scale model agreement but technical differences.”
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