Prices continued to fall at most points Wednesday in spite of Thursday lows continuing to reach single digits or around zero in upper New England and much of the Midwest. Ongoing substitution of storage use for spot gas purchases, major prior-day screen weakness and looking ahead to weekend warming trends were the chief reasons for the cash market to keep softening in the face of what appears to be substantial fundamental weather demand.
Some Northeast citygates soared by as much as about $1.10 as temperatures will be getting colder in the region Thursday (Boston’s low of about 17 Wednesday was expected to sink to 10 Thursday). However, Transco’s two Zone 6 pools (New York City and non-NYC) joined the overall softness in which declines ranged from 2-3 cents to about 90 cents. Several points outside the Northeast, primarily in Texas, were flat to less than a nickel higher.
Temperatures are also sinking in the South; for example, Wednesday’s high of 49 in Jackson, MS, was forecast to drop to 40 Thursday. However, most Gulf Coast points were down despite the increase in regional heating load. The Florida citygate was one of the rare Southern points to make a small gain as Florida Gas Transmission warned market-area customers of the potential for an Overage Alert Day being declared due to predictions of cold weather in northern Florida.
It was an opposite weather trend in the Rockies, as Denver’s high of 30 Wednesday was expected to yield to a relatively “toasty” 38 Thursday, according to Madison, WI-based Weather Central. Most Rockies losses were in double digits.
Northern Natural Gas provided an indicator of how a warm-up just over the horizon can be bearish even if next-day heating load is still heavy. A bulletin board posting said the pipeline’s normal system weighted temperature at this time of year is 15 degrees. Northern was projecting system averages of minus 1 Wednesday and plus 9 on Thursday before jumping to 22 on Friday and 25 on Saturday. Northern’s demarc and Ventura pricing points fell by nearly 30 cents and about half a dollar, respectively.
“Yes, it’s damn cold and we are getting another shot of arctic air in here Friday with a winter mix,” commented a Midcontinent producer. But the weekend will be noticeably warmer, he added. “I do think it’s [price weakness] due to [National Weather Service] warm-ups on the six- to 10-day, 11-14 day, 30-day and 90-day forecast maps.”
The producer agreed that buyers are increasing their use of storage because the market is “going up against some big year-on-year numbers and should go to a surplus again by the end of February, if forecasts remain accurate.” Commenting on recent natural gas futures drops, he said the funds’ positions are “even shorter now, so they’re not too worried. I do think we’ll break [below] $7.50 before the February settlement.”
A utility buyer in the South confirmed that his company is looking at every cold snap as an opportunity to speed up behind-schedule storage withdrawals. However, he said the forecast for Thursday was so cold that he needed to buy “a little” swing gas Wednesday to go with the maximum allowable daily storage pull.
The National Weather Service (NWS) expects a chilly West and relatively moderate East next week. In its forecast for the Jan. 28-Feb. 1 workweek, the federal agency predicts above-normal temperatures everywhere east of a line running southward along Michigan’s western border before turning southwest at the southern end of Lake Michigan through central Illinois, southeast Missouri and northwest Arkansas to include the eastern third of Texas. NWS looks for below-normal readings everywhere west of a line running southward through the central Dakotas, then turning southwest through central Colorado and the northwest corner of New Mexico before turning south again along the New Mexico-Arizona border.
Ron Denhardt of Strategic Energy & Economic Research matched consensus expectations in predicting a 160 Bcf storage pull for the week ending Jan. 18.
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