Cash prices overall added an average nearly 15 cents Wednesday as multi-dollar gains at New England points led the charge higher. Midcontinent points posted solid gains, but the East and California chalked up even higher ones. At the close of trading January futures had surged 16.1 cents to $3.700 and February had jumped 15.8 cents to $3.720. January crude oil fell 62 cents to $87.88/bbl.
Producers in the Midcontinent said continued injections and utility buying prior to the arrival of cold weather may have spurred Wednesday’s higher prices. “I think people are injecting gas before the storm comes in and when it comes in no one will want to buy it,” said an Oklahoma producer. He suggested utilities were buying gas before a major cool down arrived during the Sunday-Monday-Tuesday period.”This situation happens all the time.”
He added that previous interrupted service on Oklahoma Gas Transmission (OGT) had been restored, “and now OGT is trading higher than Panhandle Eastern. I guess utilities on OGT are buying ahead of the weather.”
Other market centers in the area such as NGPL Midcontinent Pool will service large markets such as Chicago, but “I have heard that shippers into Chicago have seen 20% allocations. That is why the prices are not taking off,” he said. “We love the high prices. Bring it on. I think $4 would be an attractive sale.”
According to AccuWeather.com Senior Meteorologist Alex Sosnowski, a massive storm is expected to sweep its way across the country beginning this weekend. “Depending on the path of a storm over the northern Pacific Ocean, a storm could bring accumulating snow to the southern Rockies and parts of the Plains this weekend. Cold air is forecast to begin a southward drive over the Rockies and Plains late this week, [and] a storm will ride this push of cold air this weekend, enhancing snow in some of the traditional upslope areas of the High Plains and along the front ranges of the Rockies.”
He added that the Rockies were likely to see much needed snowfall. “[E]nough moisture and energy from the storm will be centered far enough west and south to bring snow to the mountains of Utah, Arizona, New Mexico and southern Colorado. Areas of snow will also break out farther east over the central and northern Plains to the Upper Midwest. How much snow falls in all of these areas will depend on the track of the initial storm as well as how and if the storm fragments into parts after negotiating the Rockies.”
Quotes on NGPL Midcontinent Pool added 10 cents to average $3.28 and Thursday deliveries on OGT gained 10 cents to $3.29. On NGPL, Amarillo next-day gas rose 9 cents to $3.36. On ANR SW next-day gas added about a dime to $3.29 and on Panhandle Eastern Thursday parcels gained 7 cents to $3.21.
Volatility continued to cause havoc on New England points as power prices surged. IntercontinentalExchange reported that peak power Thursday into the New England Power Pool’s Massachusetts Hub jumped $18.68 to $76.49/MWh and at the New York Independent System Operator’s Zone G delivery point [western New York] Thursday peak power added $11.00 to $65.00/MWh.
Daily fluctuations in temperatures are likely to keep gas buyers on their toes. AccuWeather.com forecasts that the high Wednesday in Boston of 56 will drop to 39 Thursday before hitting 47 on Friday, two degrees above normal. New York’s high Wednesday of 48 is anticipated to drop to 41 on Thursday before climbing to 48 Friday. The seasonal high in New York is 47.
Thursday deliveries into the Algonquin Citygate vaulted $3.13 to $9.43 and gas delivered to Tennessee Zone 6 200 L went for $9.61, $3.13 higher. At Iroquois Waddington gas rose 72 cents to $5.50. To the south gains were more muted. Deliveries on Dominion added 18 cents to average $3.42 and Tetco M-3 buyers had to pay 15 cents more at $3.76. On Transco Zone 6 NY next-day gas added about 69 cents to $4.34.
Western gas prices were nearly as positive. Malin was quoted at an average $3.54, higher by 14 cents, and deliveries to the PG&E Citygates rose 11 cents to $3.91. At the SoCal Citygates next-day gas gained 14 cents to $3.79, and at the SoCal Border Thursday parcels added 16 cents to $3.62. On El Paso S Mainline next-day deliveries jumped almost a quarter to $3.69.
Analysts saw the advance as weather-driven, but futures traders saw the market holding technical support. “$3.50 is the number and it looks like it is going to hold there,” said a New York floor trader. “Many players had closed their books on Nov. 15, and I look for the market to hang around these levels for the rest of the month, between $3.50 to $3.80.”
Traders Thursday are looking to weekly gas storage figures to be issued by the Energy Information Administration. All indications are that bulls will be treated to the strongest withdrawal of the early heating season. Ritterbusch and Associates is looking for a draw of 71 Bcf, while Citi Futures Perspective analysts calculate a 70 Bcf decline. At United ICAP predictions are for a 76 Bcf withdrawal. Last year 14 Bcf was withdrawn and the five-year average stands at a 51 Bcf reduction.
Technical analysts versed in Fibonacci, Elliott Wave and seasonality see a convincing case for sharply lower prices. “Of all the markets that I am covering right now, natgas presents the most compelling technical case for a dramatic move from here,” said United-ICAP Vice President Walter Zimmermann. “And that would be to the downside. Every technical indicator points lower. All the bears need from here to further their case is a decisive close below the $3.465 level as 0.236 of the entire $1.902 to 3.933 advance. An average seasonal decline would target the $2.280 area by early February.”
Weather forecasts continue to show neither concerted warming nor cooling trends. “Our specific forecast [Wednesday] is a bit stronger with next week’s cool push into the Midcontinent per the European model trends, but then we are also a bit stronger with warming toward the East Coast in the second half of the 11-15 day as cool troughing expands into more of the West and maybe toward Plains too,” said Commodity Weather Group President Matt Rogers.
Analysts see a repeat of December 2011. “Given current temperatures and the 15-day out forecast, December 2012 is on track to be as warm as December 2011, which itself was 16% warmer than the 30-year average on a gas-weighted basis,” said Societe Generale analyst Laurent Key. “Last year, temperatures for the first 16 days of December were 8.6% above normal; the same period for this year is currently expected to experience temperatures 23% above normal. This very warm pattern has already led us to revise the end-of-March inventory level forecast up 50 Bcf to 1.9 Tcf.”
Tim Evans of Citi Futures Perspective forecasts a 70 Bcf withdrawal for Thursday’s inventory report. Last year, 14 Bcf was withdrawn, and the five-year average stands at a 51 Bcf pull.
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