Cash prices overall tumbled 17 cents on average Thursday as weather outlooks changed abruptly. Northeastern points were the hardest hit with prices free-falling upwards of $2 at some locations, but the East and Texas suffered losses as well. At the close of futures trading December had risen 3.0 cents to $3.608 and January was higher by 2.3 cents to $3.737. December crude oil gained 65 cents to $85.09/bbl.
The Midwest and Midcontinent saw prices drop prior to the onset of a major winter storm that was forecast to hit Denver on Saturday and Omaha on Sunday, but on Thursday moderate temperatures were enough to pressure prices.
AccuWeather.com forecast that Denver’s high Thursday of 67 would rise to 68 on Friday before plunging to 42 on Saturday. The normal high in Denver at this time of year is 56. Omaha’s Friday peak temperature of 62 was predicted to rise to 76 on Saturday before dropping to 42 on Sunday.
Quotes at Chicago Citygate tumbled 16 cents to $3.62, and deliveries on Alliance fell 16 cents to $3.62 as well. Gas on Northern Natural Ventura skidded 24 cents to $3.43, and quotes at Demarcation were off 22 cents to $3.44. Deliveries on ANR SW shed 14 cents to $3.26.
Forecasters called for brutal cold by the weekend. “A storm currently strengthening over the West could spread blizzard conditions over the northern Plains into the weekend, [and] a series of storms is consolidating over the interior West to end the week,” said AccuWeather.com meteorologist Courtney Spamer.
“Already, cold air invading the storm on its northern flank was producing areas of blinding, heavy snow in portions of Montana Thursday. While snow is likely to reach as far west as the Sierra Nevada in California, the heaviest snow and worst travel conditions will be on the northwest side of the storm reaching across Montana, North Dakota part of the southern Canada Prairies and into northwestern Ontario.”
Supply managers said they were ready for the storm. “I’m just going to pull from storage,” said a Midwest buyer. “We will be fully stored after the next day or two, and after injecting on Saturday, we expect to see the storm early Sunday morning. I think I’ll need only 30,000 Dth/d, and I don’t want to pull from storage too early in the season. It works out pretty well for us for we are on a spot on the pipeline where we don’t get too many allocations.”
The steepest price drops on the day were reserved for the Northeast, which just a day earlier on Wednesday had seen prices above $9.
Forecasters called for a warming trend to move into the storm-ravaged East and Northeast. “Temperatures in the I-95 corridor will rebound into the 50s to near 60 on Saturday, then well into the 60s Sunday and Monday,” said AccuWeather.com meteorologist Alex Sosnowski. “Warm air that has been building over the West and Plains this week will slosh eastward for a several-day stint beginning this weekend and continuing into the first part of next week. Temperatures could make a run at 70 in some locations Sunday, especially in the Baltimore-Washington, DC, area.”
Quotes for gas at Algonquin Citygate dropped $2.09 to $6.36, and deliveries on Tennessee Zone 6 200 L were off by $2.28 to $6.43. Gas at Iroquois Waddington slid 74 cents to $5.26.
Farther south, declines were not quite as precipitous. On Dominion next-day gas was off 10 cents to $3.55, and at Tetco M-3 Friday deliveries fell 16 cents to $3.67. New York-bound gas on Transco Zone 6 fell 32 cents to $3.72.
Gas at East Texas locations also slid. Next-day deliveries to Carthage dropped 9 cents to $3.36, and gas into NGPL TX OK was off by 5 cents to $3.38. At the Houston Ship Channel Friday deliveries were off 9 cents to $3.37.
Futures traders were mildly encouraged by the day’s gains. “I liked the $3.51-3.53 area to hold as support,” said a New York floor trader. “The market has built a little base of support and may move higher from here.”
Early on, analysts were struggling to get a grip on the weekly storage figure from the Energy Information Administration (EIA). It looked as though the offsetting effects of cold weather and the demand destruction caused by Sandy were causing some confusion, but in the end the cold weather seems to have won out. “The possibility of a surprise EIA report this week [was] about as high as it’s ever going to get. Forget the other stuff they tell us, res[idential]/com[mercial] demand tealeaves are a crap shoot by any measure,” said John Sodergreen in his weekly Energy Metro Desk survey.
The survey showed a build of 27 Bcf, exactly the same as Reuters. The Reuters poll consisted of queries to 25 analysts with a range of 16-50 Bcf. Analysts at Citi Futures Perspective calculated a build of 32 Bcf, and Bentek Energy expected an increase of 26 Bcf. Last year, 48 Bcf was injected and the five-year average is for an increase of 36 Bcf.
Increases in storage may be history as the National Weather Service (NWS) forecasts increased heating requirements in important energy-consuming sections of the country. For the week ending Nov. 10, NWS predicts New England will see 171 heating degree days (HDD), or 21 more than normal. New York, New Jersey and Pennsylvania should shiver under 160 HDD, or 23 more than normal. The Midwest from Ohio to Wisconsin is predicted to endure 152 HDD, or 1 fewer than normal.
Tom Saal, vice president of INTL FC Stone in Miami, in his work with Market Profile was looking for December futures to test Wednesday’s value area at $3.586 to $3.566. Following that, he expects value areas at $3.706 to $3.674 and $3.837 to $3.797 to be tested. Typically, value areas are filled the next day.
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