As a Northeast marketer had predicted the day before, prices continued to move higher Friday (including several spikes) at citygates in his region, but moderate softness reigned in the rest of the market. The Northeast was bracing for a cold blast with temperatures bottoming out around freezing or lower. But although similarly frigid conditions were in the forecasts for the Midwest as far south as the Midcontinent and for the Rockies, those areas failed to find enough heating load to lift prices.
The weekend drop of industrial demand was another bearish factor, and Nymex traders had provided essentially neutral prior-day guidance for the cash market with Thursday’s decline of 0.9 cent by January futures.
Losses at most points were all in single digits as they ranged from 2-3 cents to nearly a dime. There were still several flat locations, but they had dwindled in number from the previous two days. A gain of a couple of pennies at Florida Gas Zone 1 was the sole increase outside the Northeast, where a similar uptick by Line 300 in Tennessee’s Zone 4 was joined by regional citygates that were about 15 cents to nearly 75 cents higher.
Futures again will provide neutral directional signals for Monday’s cash quotes after the prompt-month contract was unchanged at $3.127 (see related story).
Ruby Pipeline said it would be taking nominations for Sunday’s gas day in anticipation of having enough linepack built up by then to accommodate limited amounts of service that are likely to grow during the early part of this week (see Transportation Notes). Despite the prospect of regaining additional takeaway capacity, Rockies prices fell between about a nickel and nearly a dime.
High linepack prompted El Paso to set its probability of declaring a Strained Operating Condition or Critical Operating Condition to high. Westcoast continued to report its linepack also trending toward undesirably elevated levels.
There’s “no demand anywhere,” a Midcontinent producer exclaimed. Even with subfreezing weather in the Midwest market area, gas was a tough sell Friday, he said. And although a four-day outage of Enogex’s Line 20 was being completed Friday, its return to service for the weekend did nothing to support Midcontinent prices, he said.
“Shale gas is kicking our [rear end],” he went on, referring to conventional gas producers such as himself. The producer said he wouldn’t be surprised to see voluntary shut-ins occurring soon, especially if the mild weather of December extends much into the winter season. He didn’t see how people could make any money on $3 gas (all but three Midcontinent trading locations averaged less than $3 Friday).
A lot of producers were hedging their gas a year ago, he said, but many have reduced hedging now or let such activity drop entirely. He said he was already trying to put together January deals, but nobody was interested yet, possibly in anticipation of prices falling lower by bidweek.
The Baker Hughes Rotary Rig Count reported a two-unit dip to 818 in its tally of U.S. gas-directed drilling activity during the week ending Dec. 16. An increase of one rig in the Gulf of Mexico was offset by three being idled onshore, Baker Hughes said. The new count is 6% lower than a month earlier and down 13% from year-ago levels.
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