Physical natural gas prices Friday rose an average 79 cents to $4.92, but if the highly volatile and constrained New England points are removed from the figures, the average was a loss of 2 cents to $3.58.
Declines were widespread, but a severe storm rolling into the Boston-New York corridor prompted buying for the weekend and Monday. Many Northeast and East points made multi-dollar gains. At the close of trading March futures had fallen 1.3 cents to $3.272 and April was down 0.8 cent to $3.337. March crude oil eased 11 cents to $95.72/bbl.
A Rocky Mountain producer is optimistic on the price front. “Everybody is bearish, but I don’t know why. I’m pretty optimistic as long as the weather doesn’t turn to mush on us.”
He did offer one caveat that “this storm is going to get a lot of publicity, but the northeast part of the U.S. is the world’s largest market for heating oil, and its not really all that gas-intensive. I looked at the figures and the residential and commercial heating demand in February for Massachusetts is about the same for Colorado. You would think it would be high because of more people, but they have a lot of heating oil demand.”
Census figures from 2010 show Massachusetts with a population of 6.5 million and Colorado at 5.0 million.
“If you want it to be cold, you want it to be cold in the Midwest. Seventy percent of the homes use gas. Illinois, Indiana, Wisconsin, Minnesota; those are the places you want it to be cold,” he said.
Rockies prices for weekend and Monday gas were down about a nickel or more. Quotes on CIG Mainline were 5 cents lower at $3.25, and at the Cheyenne Hub gas came in at $3.26, down 5 cents. On Northwest Wyoming deliveries over the weekend and Monday traded 7 cents lower at $3.31 and at Opal gas was seen at $3.33, also 7 cents lower. On Questar, parcels were quoted down 9 cents to $3.26.
Northeast prices surged as buyers wanted to be well supplied ahead of the storm. Boston was bracing for heavy snowfall and winds, with blizzard conditions expected to begin Friday afternoon. Accumulations of snow between 24 to 30 inches were expected in the Boston metro area, and wind gusts of up to 60 mph were anticipated with potential coastal flooding Friday evening and Saturday morning at high tide around the city.
On Thursday, Boston Mayor Thomas Menino told residents to “stay off the streets of our city,” according to the Boston Herald. Boston public schools were closed Friday, and the mayor urged businesses to keep nonessential employees at home. Weather.com meteorologist Mike Bettes reported that “more than 3,700 flights have been cancelled in the Northeast corridor Friday morning. Most of those are out of New York and Boston.”
Reports indicated that more than 800 flights were already cancelled for Saturday as well. That was expected to cause a ripple effect nationwide in air travel. On Thursday, in advance of the storm, all major airlines were scrambling to rebook passengers on flights after the storm hits.
According to the National Weather Service in southeast Massachusetts searching records dating to 1935, there have been only seven snowstorms of 20 inches or more in Boston, topped by the Feb. 17-18, 2003 snowstorm (27.5 inches) and the infamous “Blizzard of ’78” (Feb. 6-7; 27.1 inches).
Gas deliveries to the Algonquin Citygates for the weekend and Monday surged $10.49 to $31.47, and gas on Iroquois Waddington jumped $9.01 to $14.94. On Tennessee Zone 6 200 L gas was quoted at $29.68, up by $9.97.
Farther south, gas bound for New York City on Transco Zone 6 vaulted $12.53 to $20.50, yet on Tetco M-3 parcels were seen just 18 cents higher at $3.97. On Dominion, weekend and Monday gas fell 12 cents to $3.31.
Traders see an opportunity should the market continue its downward trajectory. “The way things are going, I’m thinking you buy the [March April] spread,” said a New York floor trader. “The general indication is lower, but I thought you might have a short-covering rally before the weekend, but the weather is not really affecting the market at this point. We’re supposed to get warmer weather next week. They are calling for 40 degree weather.”
Longer term, weather forecasts show a bias to the cool side, and MDA Weather Services in its six- to 10-day outlook showed below- to much below-normal temperatures concentrated in a northwest-southeast trending ridge extending from Washington to East Texas. Above-normal temperatures are limited to Quebec and northern New York.
“The net change here leaned to the colder side in the details, though the pattern has held fairly similar to [Thursday] overall. A weak cool shot will be departing the Southeast early, while the next stronger round of cold makes headway into the Midcontinent around mid-period,” the forecaster said in its morning energy report. “A short-lived warm-up is still on track for the Midwest in between, with the secondary round of cold arriving late in the form of widespread below- to much below-normal anomalies. The most stable cold will be found in the Interior West, which should stay below throughout. Confidence is moderate overall.”
The forecaster said temperatures could get colder still. “While the net risk leans to the colder side, the continued stormy nature of the pattern could provide occasional embedded warmer risks in between colder episodes. Fresh snow cover could offer colder risks to lows in the Northeast and Upper Midwest.”
Analysts saw a decidedly bearish tone to the market following Thursday’s unexpectedly light storage report. “The downsized withdrawal was able to overshadow short-term temperature views that generally favor below-normal trends across most of the U.S. within the six-14 day time frame that stretches out to about Feb. 21,” said Jim Ritterbusch of Ritterbusch and Associates.
“The cool deviations from normal are not expected to be pronounced and that price impact is being blunted by the late stage of the heating cycle when supply withdrawals usually become successively smaller through the rest of winter. With the weather factor diminishing in importance, the market will be shifting focus away from weather related demand items and toward supply side elements.”
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