The physical market lost a dime on average Thursday, but it was a mixed performance with gains in producing regions such as the Gulf Coast, Midcontinent and Rockies unable to offset free-falling prices in the Northeast and East.
The Energy Information Administration (EIA) in its weekly inventory report showed a withdrawal of 73 Bcf, significantly greater than the mid-60 Bcf pull traders were expecting. Gains were temporary. January futures fell 3.4 cents to $3.666 and February skidded 3.3 cents to $3.687. January crude oil shed $1.62 to $86.26/bbl.
Gulf marketers were taking advantage of favorable pricing relative to the Henry Hub. “We have been buying a lot of [Florida Gas Transmission] Zone 3 because it is now priced at a discount to the Hub,” said a Florida utility buyer. “I think in [Thursday’s] trading the Hub is dragging up Zone 3, and I think if the Hub can work its way back up to $3.65 [cash], then Zone 3 will continue to come in slightly under for the rest of the month.
“Load-wise, we are weak. Unless we see something happen this winter loads will continue weak. My projections weather-wise were 6 degrees higher than the average December. I look at three cities in Florida to give me a proxy for the state, and all of them were about 6 degrees warmer. If January and February are similar, we’ll be in the same boat we were in last year.”
Quotes at the Henry Hub came in 7 cents higher to average $3.48, and Friday deliveries on FGT Zone 3 gained about 5 cents to $3.43. Gas on Transco Zone 3 added 3 cents to $3.41, and on ANR SE next-day gas was up a cent at $3.38. Buyers on Tennessee 500 L had to pay 2 cents more at $3.41, and parcels on Tetco E LA rose 5 cents to $3.36.
In New England ever-changing next-day power prices prompted Northeast gas prices to spiral lower. IntercontinentalExchange reported that next-day peak power at the New England Power Pool’s Massachusetts Hub sank $25.02 to $51.47/MWh, and peak power Friday at the PJM Western Hub fell $7.04 to $36.11/MWh.
Temperatures in the area are expected to be well above normal. Wunderground.com predicted that Boston’s Thursday high of 41 would rise to 48 Friday and 50 on Saturday, well above the normal high of 44. New Haven, CT’s 43 high Thursday was anticipated to rise to 46 Friday and 52 on Saturday. The seasonal high in New Haven is 43.
Quotes at Algonquin Citygate plunged $4.41 to $5.02, and on Tennessee Zone 6 200 L next-day gas plummeted $4.51 to $5.10. On Iroquois Waddington Friday deliveries fell 91 cents to $4.59.
Farther south, prices fell but nowhere near as precipitously. Friday deliveries on Tetco M-3 shed 11 cents to $3.65, and on Dominion next-day gas was unchanged at $3.42. Gas bound for New York on Transco Zone 6 dropped 41 cents to $3.93.
Futures traders noted a weak market even after the EIA reported an inventory withdrawal greater than what traders were expecting. “The market could only get to the midpoint of the current trading range, and then it failed,” said a New York floor trader. “We kind of felt that would happen on any [storage] number. I don’t think it was a good close, and we are going to work the bottom end of the [$3.50-4.00] range [Friday].”
Futures advanced sharply Wednesday as near-term weather forecasts changed, and that pattern was in place to continue Thursday. WSI Corp. of Andover, MA, in its six- to 10-day outlook said, Thursday’s “forecast is much colder over the Northern High Plains area than yesterday’s outlook, but there are few other notable changes. The main risks are for colder temperatures than currently forecast in much of the West while the Deep South-Southeast could run warmer, especially mid-late period.” Confidence in the forecast was said to be average at best with some technical differences but fairly good large-scale model agreement.
Looking further out to the 11- to 15-day period, it said Thursday’s forecast “is slightly colder than yesterday’s outlook in the Midwest, [and] Temperatures may run still colder over the western U.S. than currently forecast.
The release of inventory figures by the EIA did show the largest withdrawal of the young heating season. Early into the heating season there has been little change in the high levels of storage gas, and last week the EIA reported a build of 4 Bcf placing inventories at 3,877 Bcf, 26 Bcf above the corresponding 2011 level.
For the week ended Nov. 30 a year ago 14 Bcf was pulled from storage, and the five-year average stands at a 51 Bcf draw. Analysts at ICAP Energy forecast a withdrawal of 76 Bcf, and Ritterbusch and Associates was looking for a pull of 71 Bcf. Citi Futures Perspective analyst Tim Evans predicted a draw of 70 Bcf.
Others saw a slightly leaner figure. “We’ve heard a number of -64 to -69 Bcf, but unless something outrageous comes out like a low number of -20 Bcf, I think we will stay in these price ranges. There is really nothing to drive us out of it,” said a New York floor trader.
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