Natural gas cash prices soared Friday following a post-Christmas snow storm that dropped more than a foot of snow on large swaths of the Northeast. A handful of locations in the region even soared north of $10/MMBtu as pipelines were running at capacity with even more cold forecasted in the week ahead.
The February natural gas futures contract, in its first regular session action as the prompt month, took Friday’s natural gas storage report of a 72 Bcf draw in stride and closed out the day at $3.469, up 5.7 cents from Thursday’s close.
While physical prices across the country were well into the plus column Friday for weekend and Monday delivery, the week’s winter chill and snow storm sent some Northeast pricing points into the stratosphere. Entering the rarefied air Friday of $10-plus gas were Transco Zone 6 New York (up $4.45 to average $10.69), Tennessee Zone 6 200 Line (up $3.26 to $10.79) and Algonquin Citygate (up $2.80 to $10.50).
Midcontinent, Midwest and Gulf points mostly added between a nickel and 15 cents. Most Midwest points stayed healthily within the $3.50 to $3.70/MMBtu zone, with Chicago Citygate adding 8 cents to average $3.49 and Michcon coming in 12 cents higher at $3.56. Along the Gulf, the Henry Hub increased by 9 cents to $3.40, while Katy was up a nickel to $3.36.
Gains along the West Coast and in the Rockies were much smaller, with most points only adding a few pennies. SoCal Citygate added 4 cents to $3.64 and CIG added a nickel to average $3.40.
One Midcontinent trader said things have been slow during the “dead zone” between the Christmas and New Year’s holidays. He added that pipeline issues were not making things any easier. “We have been having some pipeline issues with Enogex in Oklahoma where we cannot deliver gas,” the trader told NGI. “The market is there, but the gas is essentially trapped.
“January bidweek is shaping up to be quite lackluster. I think the holidays have really infringed upon the trading. Everybody is gone. I really didn’t do a whole lot this month as a result.”
Looking ahead, one Northeast trader said he doesn’t envision any significant price moves in either direction. “I think we are going to stay right around where we are, because there is just too much gas right now in the country. The shales continue to pump out gas. Even the producers who have switched their targets to oil development are still getting gas as a byproduct.”
The trader said one look at storage inventories explains the gas situation in the United States. “Today [Friday], we learned that 72 Bcf was withdrawn from storage last week, which is just about half of the five-year average withdrawal for the week. Without a prolonged stretch of bone-chilling cold, the song remains the same. We have a lot of gas.”
After falling in overnight trading to a low of $3.360 and rebounding to $3.469 just prior to fresh storage data at 10:30 a.m. EST on Friday, the February natural gas futures contract didn’t flinch when it was revealed that 72 Bcf was withdrawn for the week ending Dec. 21.
Heading into Friday’s Energy Information Administration report, which had been delayed from Thursday due to the Christmas holiday, most traders and analysts had been expecting a draw between 67 Bcf to 76 Bcf, so the actual pull of 72 Bcf was likely already factored into the market. In the minutes immediately following the report, February futures fell from $3.469 to $3.454, but as of 11:20 a.m. EST, the prompt-month contract was trading at $3.470.
Jim Ritterbusch of Ritterbusch and Associates had been expecting a 67 Bcf storage withdrawal, but he said a pull of between 70-75 Bcf would likely have already been discounted into the market price (see Daily GPI, Dec. 28). A Reuters survey of 20 industry analysts and traders produced a 76 Bcf withdrawal expectation.
The 72 Bcf draw came in well below last year’s reported 87 Bcf drop for the week, and was a little more than half of the five-year average decline for the date of 140 Bcf.
As of Dec. 21, working gas in storage stood at 3,652 Bcf. The 72 Bcf decline boosted current stocks to 81 Bcf higher than last year at this time and 413 Bcf above the five-year average of 3,239 Bcf. For the week, the East Region withdrew 42 Bcf, while the West and Producing regions extracted 18 Bcf and 12 Bcf, respectively.
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