Northeast citygates spiked by multi-dollar amounts Friday, greatly outpacing strong price increases at all points except Sumas. Transco Zone 6-New York City led the pack with a peak quote of $30 and an average of more than $16 as a massive cold front moved into the East. It is scheduled to stick around for a while.
Other gains were strong, but not nearly as dazzling as those in the Northeast. Upticks elsewhere ranged from a quarter to nearly 60 cents, with most of the smallest ones clustered in the West. The West, which will get its first major break from a lengthy siege of cold temperatures in many sections with a warming trend this week, also had the sole ringer in an overall bullish cash market with barely higher Sumas quotes.
Naturally the continuing spread of very cold weather across Canada and the northern climes of the U.S., along with some forays into parts of the South, was the major factor underlying the higher prices for a long holiday weekend. However, sources also noted the next-day support from a half-dollar screen advance on Thursday.
The last time the market saw highs of $30 or more was almost exactly a year ago. On the trade date of Thursday, Jan. 15, 2004, the Algonquin citygate, Dracut, Iroquois Zone 2, Tennessee Zone 6, Texas Eastern M-3 and Transco Zone 6 (both NYC and non-NYC pools) all had highs in excess of $30, with the Algonquin citygate peaking at $65.
Restrictions on pipeline capacity into the Northeast and Midwest kept mounting, but nothing terribly serious is occurring, traders said.
“It’s been a big change from Thursday when it was 65 degrees in the afternoon” in the New York City area, said a Gulf Coast producer who trades the Northeast. He expects the regional cold spell to last through the end of this week, but said, “It’s anybody’s guess when you get past five days.” The lower section of the Northeast was expecting lows in the teens Monday and Tuesday, he added.
It was hard to tell how much a long weekend — due to the Martin Luther King Day holiday Monday — and its accompanying extra reduction in industrial load affected Friday’s price hikes when the weather gets this extreme, the producer continued. Noting that January has been “pretty mild” in the East so far, he said it will be interesting to see if the fresh reminder of mid-winter conditions marks the start of a much colder trend. He expects the Henry Hub-NYC basis spread to remain at a spectacular $8-9 or so through much of this week, which he said would support very strong February bidweek basis for Transco Zone 6.
Acknowledging that most of the heavy market action Friday was in the New York City area, a Northeast marketer said there was “nothing crazy” about the cash spikes; it was just a case of the market adjusting to a rapid change from mild to extremely cold weather. He thought area citygates would continue to reach quadruple-digit heights this week.
“It’s not that cold and there’s a lot of storage gas around,” said a Midcontinent/Midwest marketer in explaining why price increases in his market area were considerably more subdued than those in the Northeast. Also, the Midwest, which turned frigid a couple of days in advance of the Northeast’s following suit, will start getting warmer as soon as Sunday, he said.
Noting that Friday’s deals were done for flow through Tuesday due to the holiday, the marketer said he understood that many utilities will have staffers on hand Monday but would not be trading gas. He said he was a little surprised that his company didn’t get any requests for split-day deals due to the warm-up expected to start Sunday. He suspected that utilities and end-users were “overbuying” for Saturday-Sunday and possibly planning to put any Monday-Tuesday excess into storage. “We did see quite a bit of intraday demand today, though,” he added.
Commenting on Sumas being the only barely higher point in Friday’s market, a Calgary-based producer said that even with a winter storm moving in from the Pacific Ocean, weekend power loads were unusually weak in the Pacific Northwest. In contrast with Sumas, Westcoast Station 2 prices were very strong due to production losses to freezing in British Columbia, he said. The producer estimated that wellhead freeze-offs had caused the loss of about 100 MMcf Thursday at Station 2, “but I think it’s coming back up today.” He also estimated that the Aeco C Hub had lost about 150 MMcf due to similar freeze-offs in Alberta. The Calgary area had started to warm up a little Friday but was still below zero degrees F., he said.
Citigroup analyst Kyle Cooper made an early estimation for the upcoming storage report (to be released Friday due to presidential inauguration activities Thursday in Washington) “for a draw slightly larger than last week and near 100 Bcf.” Updated weather forecasts “make a draw of over 200 Bcf for the week ending Jan. 21 less likely,” he added. “The forecasts have been moderated and with both the holiday on Monday and the presidential inauguration on Thursday, that draw might not exceed 200 Bcf.
“Mother Nature really has not been kind to the bulls. The extreme weather that has arrived was over Christmas and now yet another holiday week. It would simply be much more bullish to have the cold arrive during the heart of a [full] workweek.”
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