Physical natural gas prices overall traded down an average of about a dime Thursday as most traders elected to get deals done prior to the release of Energy Information Administration (EIA) storage data.
Broad weakness prevailed across all regions, but Northeast points suffered the greatest declines. The EIA reported a withdrawal from storage of 18 Bcf, somewhat lower than market expectations that were closer to a 30 Bcf pull. Futures prices fell and ended the day in the loss column. The December contract shed 5.7 cents to $3.703 and January was lower by 5.8 cents to $3.821. December crude oil fell 87 cents to $85.45/bbl.
In the Northeast steady temperature forecasts, lower next-day power and marketers doing most of their business prior to the release of government inventory figures all contributed to softness in next-day gas prices.
Looking at the winter heating season marketers said “if cold weather hits, Algonquin and Tennessee will just max out. If there were LNG available, that would take a lot of pressure off the market. Gas can also come in from Sable Island, but I think we will see some price spikes,” a Houston-based marketer said.
Analysts are keeping a close eye on New England. “In the event of a colder-than-normal winter, or extended cold spells, New England could experience some tightening of supply,” FERC’s Ryan Jett told commissioners Thursday in a Winter 2012-2013 Energy Market Assessment presentation (see related story). “In particular, New England could see high winter power burn, which adds to winter peak demand from non-power sectors. Combined with the likelihood of lower LNG imports compared to last year and high utilization of pipelines bringing Gulf Coast and Marcellus gas into the region, this could lead to price spikes.”
Lower next-day power prices at eastern points helped pressure prices lower. IntercontinentalExchange reported that day-ahead locational marginal prices at the New England Power Pool’s Massachusetts Hub fell $6.99 to $55.56/MWh. In the Mid-Atlantic, real-time peak power at the PJM western hub fell $5.67 to $44.50/MWh.
Quotes at the Algonquin Citygates tumbled 98 cents to average $6.39, and next-day gas at Iroquois Waddington fell 42 cents to $5.44. On Tennessee Zone 6 200 L next-day gas fell 93 cents to $6.21, but late-session trading had Tennessee Zone 6 changing hands at $5.95.
Farther south, next-day prices also weakened. Friday deliveries to Tetco M-3 were 6 cents lower at an average $3.96, and packages on Dominion were off by 9 cents to $3.73. Deliveries to New York on Transco Zone 6 came in 4 cents lower at $3.99.
Weather wise, the East Coast can expect relatively stable conditions for the next week. “Strong high pressure from the upper Midwest will move over the [Mid-Atlantic] region this weekend and remain in control of the local weather through Thanksgiving,” the National Weather Service in New York City said.
East Texas prices also weakened. Carthage deliveries were quoted a nickel lower to average $3.59, and gas on NGPL TX OK was quoted 6 cents lower at $3.57. At Katy Friday gas was 3 cents lower at $3.60, and at the Houston Ship Channel buyers were able to pick up next-day parcels 4 cents lower at $3.59. Transco Zone 1 was seen 4 cents lower at $3.60.
Rockies prices also came in lower than Wednesday. On CIG Friday gas was seen 6 cents lower at $3.56, and deliveries on Northwest Pipeline Wyoming were quoted down 6 cents as well at $3.58. Gas at Opal dropped 7 cents to $3.64.
“Prices struggled to maintain recent highs once the storage number came out,” said a New York floor trader. “We never saw the recent gains as a fundamental rally. Unless you see something fundamental in the market, traders will probably take more off the table.”
Analysts looking for a surprise in Thursday’s 10:30 a.m. EST release of storage data from the EIA were not disappointed when the figures showed a withdrawal of 18 Bcf, quite a bit less that estimates as much as 10 Bcf greater. With weather patterns becoming more variable and the impact of Sandy on northeast supply and demand not fully known, wide swings in the estimates were in play.
“Well, we will definitely see the first draw of the season this week, but we also expect to see at least one more build before the season formally spins the flow direction in reverse for the Winter,” said John Sodergreen, editor of Energy Metro Desk (EMD) prior to the report. “So, we won’t know the winner of the end-of-season storage competition for another few weeks. The range of forecasts is appropriately wide this week, actually it’s [the] widest we’ve seen this year: plus 6 Bcf to minus 34 Bcf.”
Last year, 20 Bcf was injected, and the five-year average stands at a 17 Bcf increase, but for the week ended Nov. 9 a survey of 26 traders and analysts by Reuters showed a sample mean of a 14 Bcf draw with a range of a reduction of 32 Bcf to a build of 9 Bcf. United ICAP forecast a withdrawal of 31 Bcf and Bentek Energy was looking for a pull of 29 Bcf. The EMD survey showed a 21 Bcf withdrawal.
Regardless of the storage figure, analysts are suspicious of further market advances following the cumulative 25.7-cent gain posted by the December contract this week. “From my technical and other points of view, I am not a huge believer in this bullishness,” said a Washington, DC, broker.
The broker did admit that Elliott Wave analysis did show further upside. “We are probably in the fifth wave advance, which began in late August or early September, and Elliott gives it up to $4.50. I don’t think it has a chance in Hell of doing that, but that’s what Elliott says.”
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