Physical gas prices declined on average by 9 cents Thursday as Northeast traders had to deal with constraints and cold weather, but there were milder conditions in the East and Gulf Coast region. The Energy Information Administration (EIA) reported that inventories increased 4 Bcf, but the market was expecting a modest draw, and futures prices took a double-digit beating. At the close January had fallen 15.3 cents to $3.648 and February was down 14.8 cents to $3.668. January crude oil added $1.58 to $88.07/bbl.
“[Friday] is the big issue with us. There is cold weather along with pipeline cuts on Algonquin and Tennessee. There is just too much gas trying to go somewhere,” said a Northeast marketer. He added that based on forecast cold weather and pipeline issues “Gas for Friday delivery on Tennessee Zone 6 200 L traded on average at $9.73, and I would expect it to trade between $9.50 to $10 and about 30 cents higher on AGT [Algonquin Gas Transmission].”
Algonquin posted notices of capacity constraints upstream of its Cromwell, Stony Point, and Oxford compressor stations as well as at the Tennessee Gas Pipeline interconnect at Mendon.
Temperatures in the Northeast were expected to plunge Friday, but conditions farther south were anticipated to be slightly milder. AccuWeather.com forecast that Thursday’s high in Boston of 44 would drop to 35 on Friday, well below its seasonal norm of 47. In New York City, Thursday’s high of 45 was predicted to ease slightly to 44, five degrees below its seasonal norm.
The disruptions in the Northeast along with cold temperatures prompted gains whereas in the East next-day gas settled lower. Quotes on Algonquin gained 20 cents to average $9.98, and on Tennessee Zone 6 200 L Friday deliveries added 61 cents to $9.73. At Iroquois, Waddington gas came in at $6.10, up 3 cents.
Weather going forward is expected to be mild in the Mid-Atlantic. “In the wake of the rain and snow that fell over the region on Tuesday, quiet weather is in store for the rest of the week and the weekend,” said Brian Thompson, AccuWeather.com Meteorologist. “After some sunshine Wednesday and cool temperatures across much of the region, tranquil and seasonable weather will continue [Thursday]. A strong area of high pressure will be in control for the next several days, which will keep the stretch of dry and tranquil weather going. Clouds will thicken up a bit later Friday and Friday night as some warmer Pacific air moves in, but any precipitation should stay north of the region. While it will be a slow process, the warmer air will win out by the end of the weekend and early next week.”
Quotes on Tetco M-3 fell 21 cents to $3.98, and deliveries on Dominion shed 11 cents to $3.73. Parcels on Transco Zone 6 New York skidded 97 cents to $4.43.
Nary a word of restrictions and transportation issues on Florida pipelines. “We’ve just been talking about how light our December loads are expected to be,” said a Florida municipal buyer. “One of our gas-fired generation units is down longer than anticipated, and what I would love to see when our load is not going to be up is for colder weather to come in and everyone else’s load peak where they thought it wasn’t going to and then I can have a place to put all my length.”
Thursday was not a good day to find a home for Florida and Gulf Coast length. FGT Zone 3 was quoted at an average $3.66, down 14 cents, and deliveries on Transco Zone 3 were off by a dime to $3.64. On Tennessee 500 L next-day gas shed 7 cents to $3.65, and gas delivered to the Henry Hub fell 9 cents to $3.61. On Columbia Mainline Friday gas lost a dime to $3.60, and on ANR SE next-day gas was off 8 cents to $3.59.
Futures traders looked at the day’s decline as the market locating a new support area but confessed that the market was a hard read. “Most guys close their trading books on Nov. 15, and it’s hard to see what new activity might evolve from here,” said a New York floor trader. “The next support area is $3.60, but tomorrow being Friday, there might be some short-covering with a little pop higher.”
Estimates of Thursday’s inventory figures varied widely, and volatility was high once the number hit the market. “This week’s EIA report should be a big surprise,” said John Sodergreen, editor of Energy Metro Desk. “The range of forecasts this week are all over the lot; second, the spread between the three categories we track is a whopping 5 Bcf — all we need is a 3-point diff[erence] to call a surprise EIA report of 5 Bcf high/low of the report tally.
Last year, 2 Bcf was injected, and the five-year average is for a draw of 18 Bcf. A Reuters survey of 30 traders and analysts revealed an average 12 Bcf pull with a range from a decline of 28 Bcf to build of 4 Bcf. ICAP Energy calculated a 7 Bcf drop, and Bentek Energy was looking for a 2 Bcf decline. Citi Futures Perspective analyst Tim Evans predicted a 4 Bcf increase.
Tom Saal, vice president of INTL Hencorp Futures in Miami, cautions, “It is that time of year when the market can react very quickly to a change in the short-term weather forecast. Don’t get too complacent.” In his work with Market Profile, he was looking for January futures to test Wednesday’s value area at $3.783 to $3.743. He also saw the market “eventually” testing value areas at $3.898 to $3.864, $4.041 to $4.013, and $3.679 to $3.630 “in no particular order.”
Weather forecasts changed little overnight, with aggressive warmth seen in the one- to five-day period, moderating warmth in the six- to 10-day, and northern cooling creeping into the 11- to 15-day outlooks.
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