Physical gas prices overall on average for weekend and Monday delivery rose a stout 25 cents, but subtracting the price effects of such congested Northeast pipelines as Algonquin, Iroquois, portions of Tennessee and parts of Transco, a broad based decline averaging 8 cents appeared. No points outside of the East and Northeast experienced gains. At the close of futures trading March had shed 1.0 cents to $3.153 and April was down 1.3 cents to $3.218. March crude oil fell $1.45 to $95.86/bbl.
One school of thought has it that the bullish case is intact. “I don’t know what the traders are worried about. We have a tough storage report for [the week of Feb. 18-22], we know that. It was one of the few cold weeks last year, and we had a withdrawal of 155 Bcf and that compares to a five-year average of 140 Bcf. I am looking at estimates of around a 120 Bcf withdrawal,” said a Rocky Mountain producer.
“After that, it [storage comparisons] gets real easy through March. Heating demand last March was the lowest it has been in 10 years. I am looking at an ending storage inventory of 1.9 Bcf to 2 Bcf, depending on the weather and all the projections are dependent on numerous assumptions.
“These guys aren’t even watching the weather forecasts,” he said. “The Weather Center is saying there might be a blizzard in the Midwest next Thursday. Something like 71% of the homes there use natural gas as opposed to 50% nationally. The problem is, these forecasts change every other day.”
Forecasters see the possibility for multiple storms to impact the Midwest in the coming days. “The parade of storms across the U.S. is expected to continue next week with the potential for more than one round of snow for some major Midwestern cities next week, including Chicago and Detroit,” said AccuWeather.com meteorologist Meghan Evans.
“Farther south, severe weather will be a threat for some communities, [and] Minnesota, Wisconsin, Michigan, Illinois, Indiana and Ohio may get travel-disrupting snow from the storm during the Monday-Tuesday time frame…There is potential for snow to fall in Chicago, Green Bay, Indianapolis and Detroit. Gusty winds up to 40 mph could reduce visibility further and add to travel impacts from the storm.”
Weekend and Monday gas at Rocky Mountain points, however, slipped. Gas deliveries on CIG mainline fell 7 cents to $3.13 and at Opal prices shed 11 cents to $3.19. At the Cheyenne Hub gas was seen at $3.15, 10 cents lower, and on Northwest Pipeline Wyoming weekend and Monday packages came in at $3.17, a dime lower. On Questar gas was quoted at $3.15, down 10 cents.
Weekend and Monday gas at Northeast points moved higher as a more immediate storm was expected to pound portions of New England and the Northeast over the weekend. “The storm will bring some snow to coastal areas of the mid-Atlantic and a windswept major snowstorm to part of New England and Atlantic Canada this weekend,” said AccuWeather.com’s Alex Sosnowski.
“A preliminary period of snow will affect much of the I-95 corridor and central Appalachians to start the weekend, but the main storm will energize Saturday afternoon and evening just off the Virginia Capes,” he said. The storm was likely to drop snow in portions of northeastern North Carolina, southeastern Virginia, the Delmarva Peninsula, the Jersey Cape and central and eastern Long Island.
Quotes on Algonquin Citygate for weekend and Monday delivery jumped $4.36 to $14.86, and on Tennessee Zone 6 200 L, gas came in $3.58 higher at $13.97. Deliveries to Iroquois Waddington gained $2.24 to $6.50. Points farther south also felt the impact of the storm. Gas into New York City on Transco Zone 6 jumped $9.50 to $14.63, and on Tetco M-3 prices rose 28 cents to $3.80. On Dominion packages for weekend and Monday gas fell 8 cents to $3.24.
Futures traders characterized Friday’s activity as lackluster. Although the March contract made a new low, much of the day’s activity was derived from funds and managed money rolling long March positions to long April. “The funds are still rolling and that can cause the March April spread to widen,” said a New York floor trader. “People are generally looking at Thursday’s report as bearish, the clock is ticking on winter, and we are getting by. There is no reason to press this market upward.”
Going into the weekend, longer-term weather forecasts changed little. Commodity Weather Group in its Friday six- to 10-day outlook was looking for below- to much below-normal temperatures north of a line from West Texas to North Carolina. The “outlook offers very few changes overall for the next two weeks, but we are watching plenty of opportunity for detail variations mainly associated with storm systems traveling through the active flow,” said President Matt Rogers.
“The biggest one still looks to be a southern Rockies low that travels to the lower Plains, then Midwest and East Coast over the course of next week with potential stronger winter weather impacts in Chicago and the Northeast by late week. The 11-15 day continues to offer a complex pattern setup with colder troughing toward the western U.S. that extends to the middle third at times. The East Coast is a bit warmer [Friday] in the 11-15 day, but the degree of the warmth is still limited substantially by a blocking ridge feature between Hudson Bay and Greenland.”
Analysts interpreted last Thursday’s inventory report as indicating the need for further upward adjustment in season-ending inventory stocks “that appears likely to fall north of the 2.2 Tcf level based on current temperature forecasts,” said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients.
In spite of the forecasts for below-normal temperatures, “cold patterns are likely to be limited to the western half of the U.S. and deviations from normal are looking less pronounced within significant consuming regions,” he said. “This is why the weather factor was unable to offer much support amidst [Thursday’s] sharp price slide. [The] bearish miss appeared to represent a combination of another uptick in production combined with a steady import flow from Canada. We are also leaving open the possibility that industrial offtake may not be as strong as would be implied by recent U.S. economic releases.”
Ritterbusch is a bear. Rallies “of more than 10 cents off of prior-day’s lows would represent fresh selling opportunities. With that in mind, we will suggest using any advance back toward $3.30 in April futures as a selling opportunity in anticipation of a price decline to the $3.10 area. In sum, although this market has failed to provide a price advance that we had hoped for, we will continue to suggest working it strictly from the short side.”
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