Post-weekend weather turned out to be considerably colder than many were expecting, and prices soared Monday in response. Several Northeast citygates led the pack with spikes of about 75 cents, while the PG&E citygate brought up the rear with a gain slightly shy of 20 cents. Western points in general tended to see most of the smallest upticks.
In last week’s forecast for Nov. 24-28, the National Weather Service saw a wide swath extending to either side of the Rocky Mountains as the only region likely to see below normal temperatures, and projected above normal readings for the northeastern quadrant of the U.S. and normal conditions in the rest of the East (see Daily GPI, Nov. 19). But as of Monday portions of the East Coast and desert Southwest (including California) were about the only markets where low temperatures were not dipping into the 30s or lower.
“It certainly seems colder today than we expected last week,” said a Midwestern utility buyer, adding that even as late as Friday her company was not expecting regional lows in the teens and 20s. She was doubtful that swing prices could hold on to their big advances, though, noting that an online trading service that afternoon showed Henry Hub baseload through the end of November priced about a dime lower than Monday’s average in the high $4.50s.
Another source provided an extra clue of likely softening Tuesday, saying his Chicago citygate sales had fallen from the mid $4.80s early to the low $4.70s later on.
A Gulf Coast marketer also reported stronger demand than anticipated due to quite a few customers being surprised by just how severe an eastward-moving cold front had gotten over the weekend. Of course, industrial load returning after the weekend also played a part in the rally, he said. Just the fact that Houston traders had to dig overcoats out of their closets Monday morning as overnight lows approached freezing probably added a touch of psychological bullishness to the market, he added.
Northeast numbers saw bigger gains than the Gulf Coast by about 20-30 cents, a producer said. He noted that it was something of a “catch-up” move since Gulf prices had started rising late Friday, when trading for the Northeast was pretty well wrapped up. “Fundamentally I didn’t expect this much run-up [Monday],” he said, adding that much colder Midcontinent weather had helped pull up prices in the milder Northeast.
An eastern utility buyer wondered how natural gas futures could manage a gain of nearly a nickel when Nymex’s January contracts in crude oil, heating oil and unleaded gasoline were collapsing, with crude plunging nearly $2 to less than $30/bbl following a report that OPEC production levels continue to exceed the cartel’s set quotas. But then she conceded that it’s an old and unsettled argument about just how closely the prices of gas and oil are linked.
Lehman Brothers analyst Thomas Driscoll said warmer weather last week (103 heating degree days for that period vs. 129 HDDs in the previous week) led him to forecast a 10 Bcf injection in the Energy Information Administration’s storage report Wednesday. Meanwhile, Kyle Cooper at Citigroup still leans toward a small decline, saying his final estimation for this week’s report ranges from unchanged to a withdrawal of up to 10 Bcf.
A producer mused that because EIA will issue its report around noon Wednesday, “just about everyone will be gone” to get a jump on the long weekend.
Tuesday’s trading for the five-day Thanksgiving weekend could get complicated by having to deal with varying temperatures, according to a Midwest utility buyer. Her company is expecting Monday’s conditions to get even colder through Friday, followed by a warming trend Saturday and Sunday. It will be “a task juggling demand” with so many people out of the office for the holiday, she said, but this is “a good time to have as much storage flexibility as we have.”
A producer said bidweek saw some action Monday, “but not as much as I expected. We got most of what we needed done. It seems traders are starting earlier and earlier, getting [next-month] deals done before bidweek even starts. There definitely won’t be much out there after today.” He reported hearing from some customers who had “take-it-or-not” options in their contracts with the producer, and they planned to withdraw gas from storage for “ratcheting” reasons during December in lieu of taking delivery on new production.
December index premiums were getting stronger Monday, which was almost certainly related to the surge of cold weather, a marketer said.
©Copyright 2003 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.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |