It was still cold along the East Coast Wednesday, with some cities in Florida having established date-specific records for low temperatures the day before. But forecasts of widespread warming trends either already getting under way or starting Thursday caused prices to plummet by triple digits at quite a few Northeast trading points. Outside the Northeast, the market was close to evenly divided between small gains and small losses.
Expectations that Thursday’s gas storage report will further increase the current inventory surpluses to last year and five-year average volumes also were a bearish factor.
A large number of points were flat or less than 3 cents up or down. Gains ran as high as about a quarter. Not counting the Northeast and Florida citygate, losses topped out at around a nickel. But the Northeast, where a spell of icy weather was due to start moving on Thursday, counted 13 plunges of about a dollar or more among major losses ranging from about 70 cents to nearly $5.90.
Transco Zone 6’s New York pool took the day’s biggest hit, falling from an average of $10.42 Tuesday into the mid $4.50s.
Cash traders will see something Thursday that’s been in short supply recently: substantial prior-day screen support. Nymex pushed the prompt-month February futures contract up 10.3 cents (see related story).
Although Florida Gas Transmission kept an Overage Alert Day (OAD) in place Wednesday, citygate prices fell a bit more than $1.10 after having spiked the day before when the OAD was implemented.
Nearly all areas will see temperatures rising by a few degrees Thursday, and although chilly conditions will still hang around across the northern half of the U.S. and in Canada, parts of the South can expect some semblance of springlike weather.
“Weather [is] becoming a material bane” to the gas market, proclaimed Canaccord Genuity analysts. They noted that the U.S. has experienced just 1,386 heating degree days so far this withdrawal season, which is more than 15% below last year and about 8% below the long-term average. “This represents the warmest start to a heating season since 2006-2007 and has led to net storage deliveries of just 246 Bcf so far this withdrawal season. This compares bearishly to last year’s 589 Bcf and the long-term average of 537 Bcf over the same period. Looking ahead, we expect withdrawals to average 101 Bcf over the remainder of the heating season (assuming weather reverts to normal), which suggests just 1,556 Bcf will be pulled from storage this season and implies a spring finish of [more than] 2,200 Bcf,” they said.
A utility buyer in the South said the company’s service area is beginning to warm up, and although cooler temperatures will return in a few days, it will just be to normal levels for this time of year. He figures the utility’s customer demand to be less than in a normal year, and much less than last year’s fairly severe winter.
The company is in good shape to get through the rest of this winter, with plenty of storage still left, the buyer said. Actually, he said, he kind of wishes that it would get much colder. Prices probably would get higher, of course, but it would improve the company’s throughput a lot, he added.
A Midwest marketer also said the local forecast is for an intermediate warm-up followed by a return to colder temperatures. It would be nice to take advantage of prices getting lower, she said, but the company doesn’t have enough client demand to justify getting any extra supplies.
IAF Advisors analyst Kyle Cooper predicts a storage withdrawal of 68 Bcf for the week ending Dec. 30. Credit Suisse’s Stefan Revielle and Jan Stuart look for a slightly larger pull of 70 Bcf. Stephen Smith of Stephen Smith Energy Associates lowered his original estimate of an 82 Bcf draw to 72 Bcf.
Citi Futures Perspective’s Tim Evans weighed in with one of the largest projected withdrawals at 93 Bcf, which he anticipates being followed by pulls of 93 Bcf, 117 Bcf and 159 Bcf during the weeks ending Jan. 6, Jan. 13 and Jan. 20, respectively.
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