Cash prices tumbled an average of about a half-dollar Wednesday, led by free-falling multi-dollar drops in New England and other eastern and Northeast points. If those extra-volatile points are removed from the calculations, the overall average drop was of nearly a quarter.
All points declined, but somewhat more modest declines were seen at Rocky Mountain locations and California. At the close of trading February futures had dropped 11.8 cents to $3.233 and the March contract was down 11.0 cents to $3.255. February crude oil jumped $1.30 to $93.12/bbl.
In the Northeast, next-day gas prices plummeted as power prices nose-dived. Near-term weather forecasts, however, called for temperatures to fall below normal. “The temperatures in New England are likely to be colder [Thursday] than any other day,” said a northeast marketer.
Prices are likely to jump back, though. “Tennessee is going to have some sort of unscheduled maintenance at one of their compressor stations, and that will probably send prices flying [Thursday]. It is supposed to be back on line Friday, and it will still be cold but not as cold. Temperatures are supposed to start moderating next week.”
According to AccuWeather.com, Boston’s Wednesday high of 30 is expected to fall to 25 Thursday before rising to 35 on Friday. The normal high in Boston is 37. New York’s Wednesday high of 31 was predicted to rise to 32 by Thursday before reaching 36 on Friday. The normal high in New York at this time of year is 39.
The marketer said “there is probably a little lower demand right now. Schools are out and people are on vacation. I would think schools would put a pretty big dent in the market since they are pretty big users of natural gas. There are about 30 colleges in the Boston area.”
Power prices also plunged. IntercontinentalExchange said day-ahead locational marginal prices at the New England Power Pool’s Massachusetts Hub for Thursday delivery fell $33.19 to $86.48/MWh, and peak power for delivery to the PJM Western Hub Thursday dropped $6.40 to $42.64.
Next-day quotes at the Algonquin Citygate plunged $4.79 to average $10.48, but deliveries to Iroquois Waddington were off by only 32 cents to $5.30. On Tennessee Zone 6 200 L next-day parcels fell $2.44 to $9.29.
Farther south, next-day gas fell as well. Deliveries into Transco Zone 6 New York took a $6.99 hit to $9.75, yet deliveries on Dominion were lower by 18 cents to $3.09. Gas on Tetco M-3 slipped 26 cents to $3.82.
Rockies points weakened. Next-day gas on CIG was seen at $3.26, down 13 cents, and deliveries to Northwest Pipeline WY dropped a dime to $3.33. At Opal next day gas came in at $3.35, down 8 cents.
California losses were somewhat lighter. PG&E Citygate was quoted at an average $3.61, 7 cents lower, and deliveries to the SoCal Citygates were seen off 10 cents at $3.55. At the SoCal Border next-day gas was 7 cents lower at $3.47.
Futures traders noted that in overnight trading Tuesday the February contract traded down to $3.05, and some ascribed the low prices to “fat-finger” trading and not representative of the market. The day’s decline does look like preparation for still lower prices. “It looks like the market objective is the $3.05 to $3.10 area,” said a New York floor trader. “The weather is a little cold now, but it’s supposed to warm up next week. It looks like the market will be under pressure for the next three to five days.”
Medium-term forecasts continue to trend warmer. Commodity Weather Group in its morning six- to 10-day outlook shows the eastern two-thirds of the country at above-normal to much-above-normal temperatures. The Great Basin, California, Pacific Northwest and Desert Southwest are expected to be normal. The 11- to 15-day outlook is more uncertain, however.
“The models this morning are in excellent agreement on an impressively warm-dominated six-10 day (Monday-Friday next week) for the Midwest and East with above to much above normal ranges for the South too,” said Matt Rogers, president of the firm.
“However, they diverge more sharply in the 11-15 day as they struggle to handle a cold air mass spilling into the West and Midcontinent. The American models have been consistently advancing that cold into the South and East, creating more pattern volatility and a net colder 11-15. The more skillful European ensembles have consistently said ‘no’ by only allowing the cold to briefly touch maybe Chicago to Texas, but no farther south or east. At this point, we favor the more skillful Euro ensembles, but a transient early 11-15 day cold push is still a possibility.”
The forecasts of moderating weather haven’t been enough to break the market out of its recent trading range, but technical analysts see the market favoring lower prices. Walter Zimmermann, vice president at United Energy, said in a weekend note to clients, “the bearish case for natgas requires a decisive reversal lower by the $3.505 level. This level is once again well within reach. A reversal lower from there would still target a decline to $3.09 minimum.
“In the bullish case the $3.933 to 3.261 decline was the completed -A- wave down of a continuing -ABC- decline. In this model the rebound from 3.261 started the -B- wave bear market correction. The ideal peaking point for this -B- wave would be the $3.690 area. What are the implications of this model? If $3.933 to 3.261 was the -A- wave down, and if $3.261 to 3.690 ends the -B- wave up, then the -A- = -C- target would mean a decline to the $3.020 area.
Those looking for fresh storage data Thursday will have to cool their heels. Due to the New Year’s Day holiday, the Energy Information Administration pushed back the release of its storage report for the week ending Dec. 28 until Friday at 10:30 a.m. eastern.
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