Cash prices on average fell 14 cents Tuesday for Wednesday delivery with the Northeast leading the charge lower. Losses were widespread and occurred at all trading points. The market is being forced to take on differing weather forecasts with some anticipating a widespread cold carrying all the way to the East Coast, while others are more mild. At the close, February was 4.8 cents lower at $3.218 and March had lost 4.7 cents to $3.234. February crude oil shed 4 cents to $93.15/bbl.

For the moment, marketers in the Great Lakes are buying gas in anticipation of much colder weather. “It’s warm now, but it does appear that cold is behind it,” said a Michigan-based marketer.

“We did a deal on Michcon for $3.37 and deals on Consumers at $3.42 and $3.40. We have been buying a little bit on top of index because temperatures were initially cold and now may be going back to the cold. We saw where we had to do some catch-up [buying] for customers,” he said.

Quotes for Wednesday gas at the Chicago Citygate fell 8 cents to $3.30, and deliveries on Alliance shed 5 cents to $3.32. On Michcon, next-day gas came in at $3.34, down 7 cents, and on Consumers Wednesday parcels were seen at $3.38, down 10 cents. At Dawn, gas came in at $3.49, down 10 cents.

Forecasters continue to predict that temperatures will surge over much of the eastern two-thirds of the nation this week into the weekend before the advance of arctic air. According to Accuweather.com, the cold air is still forecast to reach all the way to the East Coast.

The jet stream will retreat northward from the Rockies and Plains to the Midwest, South and mid-Atlantic and allow warmer air from the south to migrate north. “Average temperatures are usually at their lowest point during this part of January. However, temperatures will trend to 10 to 20 degrees above normal during the warmup event. Places without snowcover will warm up the quickest,” said Alex Sosnowski, Accuweather.com meteorologist.

By the weekend, though “into week three of January, multiple waves of cold air will punch through the Rockies, Plains and Midwest. The waves are expected to bring progressively colder and colder conditions. “When you compare temperatures during the height of the warmup with the core of the arctic air that follows, some locations may have a difference of 40 degrees more,” said Paul Pastelok, AccuWeather.com long range forecaster.

AccuWeather went on to say that “In the East, and especially the Southeast, the progression of cold will be delayed by multiple storm systems riding northeastward from the Gulf of Mexico and an area of high pressure trying to hang on until the very last. The arctic cold is still forecast by AccuWeather.com’s long range experts to break through to the Atlantic coast near or following the third weekend of January, provided one of the storms becomes strong enough to break down the high pressure area and draw the cold air in its wake.”

Deliveries at eastern and Northeast points fell hard and fell often. At the Algonquin Citygates Wednesday gas came in at $4.52, down 23 cents, and deliveries to Iroquois Waddington were off 31 cents to $4.14. On Tennessee Zone 6 200 L next-day gas was quoted at $4.54, off by 17 cents.

On Dominion, gas was $3.09, 6 cents lower, and at Tetco M-3 next-day gas was seen at $3.39, 13 cents behind Monday’s settlement for Tuesday delivery. Gas headed for New York City on Transco Zone 6 slipped a stout 93 cents to $3.42

Gulf points also weakened. At the Henry Hub, next-day gas came in at $3.21, 8 cents lower, and at the Houston Ship Channel Wednesday gas was quoted at $3.19, down 4 cents.

Bears were energized by reports of increasing production. The most recent data in the Energy Information Administration monthly natural gas production report shows Lower 48 gas production in October higher by 0.4% month-on-month to a new all-time record of 73.5 Bcf/d (see related story). Rising production in the “other states” category and the Gulf of Mexico provided the largest gains, and new wells coming online in the Marcellus and Bakken shale plays helped boost the other states category by 1.8%, or 0.43 Bcf/d, to a new record of 23.94 Bcf/d. In addition , Gulf of Mexico production was reported to have increased by nearly 10% to 4.03 Bcf/d after production resumed from many operators following Hurricane Isaac.

Futures traders were not impressed with Tuesday’s relatively listless trading. “Prices broke $3.25 which we were thinking was the next level of support. We got down to $3.20 and rallied off that. Trading today was almost a non event. We only had an 8 cent range,” said a New York floor trader.

“These are price levels we have been in before. It’s nothing new. We are closer to $3 than $4, but there wasn’t much significance to today’s trading.”

Prices could continue sliding if the wide-ranging cold predicted by AccuWeather doesn’t materialize. Some see the cold’s impact primarily in the Great Plains as far south as Texas. MDA Earthsat in its six- to 10-day outlook shows a broad fairway of much-below-normal temperatures from Wisconsin and East Texas on the East to Washington and California on the West. From New England to West Virginia to Georgia is expected to be much above normal.

“Very strong warmth is expected to continue through the first half of the period over the eastern third of the nation while strong cold drops south into the west to central U.S. Changes went warmer in the East while the interior West to the Plains took a step colder under the highly amplified pattern. Some slight colder changes were seen into the Midwest and Texas as well,” the forecaster said.

“The impact of the cold on major energy markets appears limited. “[T]he strongest cold is expected to struggle to reach the Midwest by late period. Though the blocking is expected to still drive some impressive cold into the U.S., it should mostly impact the interior West and Rockies to Texas.

“The cold driving through the Rockies and Plains to Texas could be stronger early to mid period. A stronger linking in the ridging over the North Pole could help force a bit more cold into the Great Lakes and upper Midwest by late period.”

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