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Prices Fall on Low Holiday and Weather Demand
Only a day after spiking on the basis of much colder weather that was still several days away, prices retreated Wednesday despite forecasts that parts of the U.S. and Canada would be caught up in sub-freezing temperatures before traders returned to their offices this week. The market did not give back as much as it had gained Tuesday, as losses tended to range from about a nickel to 40 cents.
The distant threat of much more severe winter weather notwithstanding, most of the eastern U.S. was expected to enter 2004 with temperatures above normal for the first few days of January. The near-term moderation combined with another low-load, four-day holiday weekend to push prices lower at all points. The West would see the most seasonally appropriate conditions, according to The Weather Channel, as yet another potent Pacific storm was poised to bring windy, stormy and often snowy conditions to much of the region.
Last week’s trading was making a mockery of the market’s old adage about “following the screen,” one source commented. Since the bulk of cash business gets done each day before it can be influenced much by futures price movement, usually it is the following day’s cash deals that the screen provides most guidance for, he said. But last Monday’s futures weakness preceded a strong day in cash, and then cash sank on Wednesday in defiance of Tuesday’s screen spike, he pointed out.
Late cash deals Wednesday were being driven lower by the Nymex fall that followed release of the storage report, a western marketer said. Her earliest El Paso-Permian purchase in the mid $5.30s was accompanied by a couple of later packages in the $5.10 area. Similarly, ANR-Southwest sank to the mid $5.20s after trading early around $5.50, she said.
The late downhill slide helped create wide price ranges, the marketer said. The tendency was exaggerated by sparse liquidity, she added; several of her usual trading partners were out on holiday already.
The Energy Information Administration fell short of virtually all prior expectations in announcing a storage withdrawal of only 80 Bcf for the week ending Dec. 26. The screen fell big-time at first to as low as $6.10, but recovered by nearly a dime from that point to wind up the day down 41.1 cents at $6.189, a producer noted. “People were afraid of taking this thing too low because of the severe winter weather expected [this] week,” the producer said. The daily settlement was more than 40 cents above Henry Hub’s mid $5.70s average.
The National Weather Service’s forecast for the first full business week of 2003 (Jan. 5-9 period) calls for below normal temperatures across the northern tier of states, dipping in the central U.S. as low as Missouri. Above normal readings are expected from the desert Southwest through the southernmost states to South Carolina. However, the California coast and most of northern Texas are included in a horizontal buffer zone were normal temperatures are predicted.
The Calgary area was already below freezing early last week but was due to get even colder Friday, a producer in the city said. He had already finished January business well before Wednesday, but said it was a “tricky bidweek because prices were moving around a lot,” largely because of volatile futures movement. The overall trend was up, and last Tuesday would have been the highest-priced day of bidweek because of the Nymex spike that day, he added.
El Paso extended a low-linepack OFO into its fourth day Wednesday, and Northwest warned customers of potential restrictive measures that might be prompted by continued drafting of its system during upcoming “extremely cold” weather (see Transportation Notes). However, Northern Natural Gas tacked on a second day of high-linepack constraints due to unusually moderate winter weather in its market area (see Transportation Notes).
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