Cash prices resumed their descent at all points Thursday following Wednesday’s moderate rally. Recent screen weakness, an increasingly bearish storage situation and the fact that the return of colder weather is still leaving temperatures above normal in many areas weighed down the spot market.

Declines ranged from a little more than a nickel to around 55 cents. Unlike several recent trading days in which price movement has been pretty consistent across geographic areas, this one was heavily weighted toward the biggest drops occurring at Northeast citygates while western points saw nearly all of the smallest ones.

Thursday’s softness happened despite weather fundamentals getting a bit stronger. Snow will be an increasing feature of Midwest weather starting Friday and continuing through the weekend. The Weather Channel (TWC) said some locales could get three to six inches of snow by the end of the weekend. And what the forecaster called “a potentially significant winter storm” is shaping up for the weekend and could deliver up to a foot of snow in sections of the Northeast and Mid-Atlantic.

Stormy is also the watchword for the upper half of the West. Cold fronts will be moving into the region Friday from both the high Plains and Western Canada. After recording highs in the 50s Thursday, the Denver area is not expected to make it above the mid 20s Friday, TWC said.

Even the South will be chilling out again, with snow possible Friday in parts of Arkansas and Tennessee. After several days recently of warning of a potential Overage Alert Day notice, Florida Gas Transmission finally pulled the trigger on one Thursday (see Transportation Notes).

The Energy Information Administration’s estimate of a 38 Bcf reduction in storage inventories during the week ending Feb. 3 was at the bottom end of the range of prior expectations. It even included a net injection of 2 Bcf in the Producing region. Nymex traders appropriately interpreted the report as bearish and sent March natural gas futures down slightly more than a quarter.

Thursday’s screen drop, the bearishness of the storage report and the typical weekend drop in industrial load argue for cash softness to continue Friday. But a Calgary-based producer expects prices to stay fairly close to flat with only moderate declines and possibly some gains. He noted the forecasts for colder weekend weather and also noted that although March futures settled lower Thursday, a rally occurred in Thursday afternoon’s Access activity. Precisely the same thing occurred on Tuesday prior to the cash rebound Wednesday, he pointed out.

The Demarcation and Ventura points of Northern Natural Gas have a reasonable chance of seeing rising numbers Friday. The pipeline, which has a normal system weighted temperature of 20 degrees at this time of year, projected its system average as sinking to a frigid 13 degrees Saturday before “warming” to 17 degrees Sunday.

The producer noted that temperatures are still above normal in the Calgary area. Thursday afternoon the thermometer was in the 30s at a time when it would normally be around 10 degrees, he said. “Ten degrees is going to seem especially cold after this winter” when conditions return to normal, he said.

He believes cash has been doing “relatively well” recently compared to the screen. And it’s a lot easier to trade the Chicago citygate now that Nicor lifted some irksome constraints earlier this week, the producer added. “We can even inject into Nicor Hub storage.”

Prices “traveled back toward normal,” a Northeast marketer said. Going by the daily settlement, Henry Hub to Nymex basis had the Hub at a premium of about 8 cents, he went on, but while cash trading was going on in the morning, the Hub was in its more familiar position below the screen.

This is definitely an oversupplied market, the marketer said. He doesn’t think people have really been very aggressive about pulling storage this week. Those not subject to mandated withdrawals can buy new production in the spot market about as easily as they can make withdrawal, plus the new gas is probably cheaper than what they paid for the storage supply, he said. The marketer concluded that “2005 was a prime rib year for the market. This year it looks more like a Kraft dinner.”

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