Despite weather conditions more resembling mid-winter than nearly spring being due to persist into the weekend in the Northeast and much of the Midwest, this week’s three-day price climb reversed direction Thursday. Northeast citygates, which had led the trek higher earlier in the week, saw the biggest drops of up to nearly 80 cents Thursday. Elsewhere, a couple of flat points crept their way into overall declines ranging from about a nickel to a quarter.

Heating load is continuing to erode in the South, and milder weather was working its way northward into the Midcontinent, Lower Midwest and central Plains. However, the eastern end of the South can expect much colder temperatures to return by Saturday, accompanied by substantial snow in the southern Appalachians and the possibility of flakes reaching as far south as Atlanta, according to The Weather Channel (TWC).

Temperatures five to 30 degrees above average will still pervade the West, TWC said, with date-specific record highs likely Friday in the Pacific Northwest, Great Basin and northern Rockies. A high-inventory OFO by PG&E (see Transportation Notes) had relatively little negative effect on quotes at either Malin or the PG&E citygate. Their declines of about 15 cents fit nicely within overall western softening.

The Energy Information Administration estimated that 139 Bcf got withdrawn from storage during the week ending March 4. That may have seemed bullish when compared to prior expectations centering on the 110s Bcf, but as one source pointed out, traders have gotten so used to factoring storage reports into general market psychology beforehand that only the most outrageous deviations from consensus estimates arouse much reaction (i.e., the day-before-Thanksgiving fiasco last November). After some close-to-flat hesitation following the report, the natural gas screen decided to go along with plummeting petroleum-related futures and ended the day down 11.3 cents.

Analyst Kyle Cooper of Citigroup was one of the few who accurately predicted the actual pull, having estimated a range of 138-148 Bcf. “The report was finally within our expected range after a drought that was way too long,” he said Thursday afternoon. Cooper noted that the current surpluses to past storage levels did get reduced by the latest drawdown, but “at 331 Bcf (29.0%) to last year, 241 Bcf (19.6%) to the three-year average and 298 Bcf (25.3%) [to the five-year average] those surpluses are still very large.” He still considers it likely that withdrawal season will end with a hefty inventory near 1,250 Bcf.

The April crude oil contract fell by more than a dollar to $53.54/bbl on what news reports called a response to bearish inventory reports for petroleum products Wednesday. That prompted a gas market source to wonder why the oil traders were able to challenge the all-time intraday high for crude on Wednesday and still managed a daily advance after a retreat from that level, but waited until the next day to mount a negative reaction to the stockpiles data.

Other than the PG&E OFO, sources reported no transport issues in play at this time. As one said, “All the pipelines seem to be piping right along.”

A marketer expects more lower prices Friday, citing Thursday’s futures weakness and trends of slightly moderating weather in several areas. It will be a little warmer over the weekend in the Midwest before getting colder again, he said. He looks for the Chicago citygate to trade on either side of $6.80 Friday, which would represent a decline of about 15 cents. The storage report didn’t seem bullish to him, the marketer said, because his favorite source for prior guesses “hit the 139 Bcf right on the head.” A fairly large pull should have been anticipated anyway because of the cold in the East last week, he noted.

Another Midwest trader also expected lower weekend prices. “We’ve seen some reduction in heating load” for Friday, he said, but the levels have been highly variable and sporadic all through March so far. He noted that his company is dealing with “a lot of RFPs” [requests for proposals] for summer term gas out there because now is the time such deals have to be arranged.

A Lower Midwest utility said it was extremely windy in his area Thursday, but wind chill factors were no big deal “when it’s 53 degrees.” The Upper Midwest is staying very cold and snowy, “but we’re on the ‘right side’ of a regional temperature divide,” he said. It was mild enough that his utility was continuing to sell small volumes of storage and/or term gas.

A Northeast utility buyer, on the other hand, reported that he ended up buying gas for storage injection purposes because of the current cash spread to the higher summer futures strip. Thursday’s drop in prices also helped prompt his first new purchase in several days, he said; besides, the company can save on storage cycling costs by buying flowing supply. He noted that assuming one has the proper transportation contacts, it has been cheaper to move gas from the Gulf Coast to the Northeast this week than buying at the citygate.

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