Except for a few essentially flat points in Appalachia and the Gulf Coast, the two-day bullish streak in the general cash market ended Thursday. Several Northeast citygates measured declines in triple-digit amounts, while elsewhere losses tended to range from about a nickel to nearly 90 cents. Traders cited approaching breaks, however small, from the icy conditions that have plagued markets across the northern U.S. and Canada — and even down into the Southeast — over the past few days as chiefly responsible for the price reversals.
Thursday’s deals were done for Friday-Saturday flows, while trading Friday will be for the Feb. 1-2 period.
At least one source was dubious about the major softness, although he allowed that further declines are likely Friday because of the weekend demand slump and considerable weakness Thursday across the energy futures complex (crude oil for March is now below $33/bbl after having traded around $36 recently). Even with some moderation, it will remain freezing from the Northeast through the Midwest and Upper Plains, he noted. And the National Weather Service predicts that temperatures will be below average through next week throughout the U.S. except for the West Coast, he said.
The Energy Information Administration finally surpassed most prior expectations in reporting that 195 Bcf got pulled from storage last week. But the volume was regarded as basically bearish because it paled in comparison with the year-earlier draw (thus further increasing the year-on-year surplus) and because some had expected a 200 Bcf-plus number due to widespread freezing weather during the survey period. The screen took a brief stab at rising after the report before going negative and eventually winding up the day down nearly a dime.
A Northeast marketer commented that even though prices were retreating Thursday, the cold weather was “still hanging in there.” He acknowledged that regional temperatures were expected to rise a bit this weekend, but would remain below freezing. “I’m hearing that heating oil stocks in the New York City area have been so heavily used recently that they’re getting scarce,” so some dual-fuel users are having to buy gas whether they want to or not, he said.
California saw some of the smallest swing price losses, which a buyer thought was due to some traders getting caught short toward the end.
A marketer said Northeast basis for February was getting a little stronger and that he had seen Transco Zone 6-NYC basis trade as high as plus $7.00. That would put some first-of-month deliveries to the Big Apple close to $13, he noted. Basis was similarly strong for New England citygates, he said.
It was another “extremely difficult” bidweek for an industrial end-user who cited the liquidity issue. “I used to be able to place a 40 MMcf/d [baseload] order with one counterparty, no problems,” he said. “Now I call some major players and they may be able to offer only 1 [MMcf/d] or 2 [MMcf/d] each.” He reported hearing that natural gas liquids prices are rising and thus processing activity is heating up again, which may be contributing to lower levels of available dry gas. A producer on ANR-Southwest estimated that he was losing 20% of his production volumes to processing, the end-user said.
He also said he found some stronger-than-usual index premiums for February. The Chicago citygate was going at the NGI index plus 4 cents, for example. ANR-Southwest, which is generally discounted 3-4 cents, traded at index-flat, he said, and ANR-Southeast was fetching index plus 0.5-1 cent.
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