Acknowledging that most of the recent cold snap was fading except in the Northeast, prices fell across the board Wednesday by major amounts (except for a drop of only a nickel or so at Transco’s non-New York City Zone 6 pool). Although sources said the declines primarily were weather-based, Tuesday’s screen downturn of almost 26 cents also had some influence.
Disregarding the non-NYC change, quotes were down from about 15 cents to nearly 70 cents at most points, while several Northeast citygates contributed dollar-plus plunges. As if to admit that two straight days of recording $30 peaks were a bit much, Transco Zone 6-NYC took a swan dive of nearly $9 (it topped out at $18 Wednesday).
A Gulf Coast producer confirmed a Northeast marketer’s report on Tuesday that the region would be warming up a little Thursday, which led to what he called “totally weather-driven” major softness in most area citygates (he didn’t see the previous day’s futures softness as a factor). It was about 18 degrees in the New York City area Wednesday afternoon with wind chills around minus 6 degrees in the city itself but expected to be about 10 degrees higher Thursday, he said. However, forecasts call for a return back down to around 18 degrees Friday, he added.
For that reason and also because the screen rallied by a little more than 15 cents Wednesday, the producer said he expects prices to go higher Thursday, “at least in the Northeast.” He observed that existing pipeline constraints aren’t especially severe, “but if you have firm capacity,” there are no transport problems at all. Of course, it’s mainly the utilities that hold firm service, he said; producers like his company usually don’t but often rely on released capacity.
Although some may disagree, a Texas-based marketer also looks for a “small rally” in cash Thursday due largely to the screen gain Wednesday but also because despite some weather moderation, it’s still around freezing in much of the Midwest. However, he said, temperatures are currently above normal in the Chicago area with no changes in sight at this point. There didn’t seem to be as much trading activity as usual at the Chicago citygate, and dealmaking was very slow at first, he said. The recent spate of cold has helped the utilities draw down on storage, he added; they were hampered in that regard by the low loads associated with mild weather before that.
The marketer said he was hearing Chicago basis of plus 2-4 cents for February, and he saw a deal at plus 3.5 cents trade Wednesday.
As examples of the changing load picture, Westcoast has changed its imbalance tolerance range to zero pack and 20% draft. And Northern Natural Gas, which reported a normal system weighted temperature of 15 degrees at this time of year, projected its average at 20 degrees Wednesday, 21 degrees Thursday and 19 degrees Friday before dropping to 12 degrees Saturday.
Due to the Martin Luther King holiday Monday, oil product inventory reports were not released until 5 p.m. EST (as opposed to the usual Wednesday morning time), so few if any energy traders were still in their offices to pay attention. But they should extend Wednesday’s downward trends in crude oil and heating oil futures, as analyst Jay Levine of Advest Inc. characterized the reports as “decidedly bearish, and need I remind you that the trend here — improving inventories — is alive and well?” The American Petroleum Institute and Department of Energy agreed on substantial increases in crude and unleaded gasoline stockpiles last week while diverging on distillates, which include heating oil (API said they fell and DOE said they rose).
Saying his confidence was “exceedingly low as the models again indicate a wide disparity,” Citigroup analyst Kyle Cooper made a final estimation of a 110-120 Bcf withdrawal in the storage report to be announced Friday (delayed one day due to the presidential inauguration Thursday in Washington) for the week ending Jan. 14.
Â©Copyright 2005 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.
© 2022 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |