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Only 2 Points Left Out of Continuing Firmness
A drop of about a nickel at the PG&E citygate and flat Sumas numbers were the only exceptions to a continuation of rising prices throughout the spot market Wednesday. Although temperatures are fluctuating in some areas, this week’s cold wave in certain regions is proving to be more tenacious than the short-lived ones that dominated the first couple of months of 2008.
Midcontinent, Rockies and Northeast points were the clear leaders of gains ranging from about a nickel to a little more than 35 cents.
In addition to cold weather remaining in the forecast, Thursday’s cash market will have ample prior-day screen support after April natural gas futures spiked by 38.8 cents Wednesday. But Nymex’s major fireworks were emanating once again from the crude oil trading pit, where the April contract skyrocketed by $5 to set yet another daily settlement record of $104.52/bbl (see related story).
Northeast citygates made sizeable advances despite the region getting a brief respite from its most recent winter storm. Dry conditions with light winds and near- to above-average temperatures will prevail Thursday, The Weather Channel (TWC) said, but the effects of the next storm will begin to be felt on Friday.
The Midwest will also be relatively dry Thursday but it will experience lows in the teens, single digits and occasionally below zero. It can also expect to see a return of snowy weather Friday from southeast Missouri to Ohio, according to TWC. Northern Natural Gas projected that its system weighted average temperature will sink to 13 degrees Thursday and to 10 Friday before rebounding Saturday; the pipeline’s norm at this time of year is 29.
The South is staying relatively moderate in its eastern sections, but is due to have lows around freezing or slightly less in some more westerly areas such as Memphis and Little Rock. The Rockies and areas to the north will not get above the 20s Thursday, but other sections of the West will be relatively moderate, and even warm in parts of California and southwest Arizona.
El Paso is experiencing linepack issues. It said the probability of declaring a Strained Operating Condition or Critical Operating Condition has been set to high due to low linepack.
Weather 2000 indicated the current strength of heating load in reporting that as of Wednesday U.S. snow coverage was 38.7%, the highest in the last five years at this point. Comparable figures were 31.9% in 2004, 23.7% in 2005, 26.1% in 2006 and 34.6% in 2007, the New York City-based consulting firm said.
“As they say, get out of the way of this bull run right now!” a Midcontinent producer exclaimed. He thinks the market will see a $10 screen print on natural gas before the weekend and that Midcontinent points will trade above $9 (they were approaching that level Wednesday). Some more cold is arriving Thursday and Friday in his area, with one to two inches of snow predicted in his city, before a warm-up begins Sunday.
The producer said he was not sure if fundamentals “really” support the current lofty prices, “in particular gas, but it is what it is.” Referring to the gigantic oil spike, he commented, “It amazes me how far off the crude oil prognosticators are when comes to projecting inventory numbers. Most were calling for a build of 2-3 million bbl and came out with a draw in this amount. You don’t see that in natural gas.”
He also noted that the latest National Weather Service eight- to 14-day forecast is extremely bullish for gas, with below-normal temperatures occupying nearly all of the Lower 48 except for the southernmost tier of states.
A western trader said it was a odd that the PG&E citygate was Wednesday’s only softer point, but speculated that traders may have thought the price had been pushed too high earlier in the week. After all, it was trading around $9.30, which is on par with Gulf Coast numbers, she pointed out. Also, current temperatures are pretty mild in Northern California, so there is little weather-related demand.
Barclays Capital Research analysts George Hopley and Michael Zenker projected that a 139 Bcf storage withdrawal will be reported for the week ending Feb. 29.
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