Spurred by Friday’s screen drop of more than a quarter and generally milder weather trends, prices dropped across the board Monday. The Northeast, despite facing a new winter storm late Monday that would continue through Tuesday, again led the market’s downhill trek with declines of around a dollar or greater.
Other points fell between about a nickel and 35 cents, although Dominion in Appalachia was down about 70 cents.
Most of Monday’s freezing temperatures were confined to the Midwest, Upper Plains and Rockies, while a front moving eastward from the Midwest was due to bring the Northeast back into the fold after the region enjoyed a brief encounter with highs in the 30s. Meanwhile, the West Coast and southern third of the nation are experiencing mild to seasonal weather, and Western Canada conditions have moderated since a long period of extreme cold caused unusual wellhead freezeoffs last week in Alberta and British Columbia.
The key to softening prices is that the current spate of cold weather will not drop thermometers as low as last week, much less to the subzero readings recorded in late January, a couple of sources said.
It actually got to about 40 degrees Sunday, although Monday and Tuesday looked to be closer to freezing again, said one Northeast utility buyer who joked about setting up a lawn chair in the back yard and trying to get a tan. He noted that Monday’s trading extended an ongoing trend toward less volatility in price ranges. “We’re going to have more normal weather now, which will actually seem warm in comparison with much of January,” he said. He didn’t see any free-fall in prices, just gradual softening for a while longer.
There’s no immediate pressure on emptying storage accounts, the buyer went on. Storage account requirements vary, but he thought his company must get down to something like an average of 30-35% full by the end of March. Most market-area storage customers are allowed to leave some gas in storage at the end of withdrawal season, while Gulf Coast salt dome fields often require that accounts be emptied each year, he said.
With Algonquin telling shippers Monday afternoon that a “limited amount” of due-shipper imbalance make-up gas had become available on its system, that left only Northern Natural Gas among the major pipes with a significant flow constraint. NNG entered its third straight week under a System Overrun Limitation notice (see Daily GPI, Jan. 21).
Those who like gas price bullishness may have applauded, but news reports said the crowd on hand booed when Punxsutawney Phil’s handlers declared that the famous groundhog had seen his shadow Monday morning, which every meteorologist worth his or her salt knows means that six more weeks of winter is due.
A call to one Midwestern marketer yielded the report that he had taken the afternoon off to go home and shovel snow, his city having experienced its second snowstorm in about a week.
An intrastate Texas trader observed that although natural gas futures climbed a little more than 17 cents Monday, the gas screen “kind of stood by and watched” in comparison with skyrocketing oil-based futures. The crude contract spiked by nearly $2 to settle just under $35/bbl on news of unit outages at three U.S. refineries since Friday. The trader said he also had heard reports of crude traders having concerns about low inventories, although he was puzzled why they seemed worried about it Monday but not last week.
Texas Genco (the former Houston Lighting & Power) shut down a lignite-fired power plant for scheduled maintenance, he said, but that didn’t seem to make any difference in light gas demand within Texas.
Estimating a 225 Bcf withdrawal in this week’s storage report, Lehman Brothers analyst Thomas Driscoll said last week’s colder than normal weather “should lead to not only the biggest draw of the season but also the sixth largest draw since weekly data was first collected in 1994.” He added that he was lowering his end-of-season inventory estimate by 50 Bcf to 1,125 Bcf.
Kyle Cooper at Citigroup said his final estimation for the report looks for a draw of 211-221 Bcf. “From a temperature-adjusted standpoint, a draw as large as 203 Bcf would still be considered only neutral,” he continued. “This was an INCREDIBLY cold week [ending Jan. 30] on a nationally combined basis. The draw should be extraordinarily large. Obviously, a draw smaller than 230 Bcf is considered bearish on a temperature-adjusted basis, but clearly not bearish on absolute basis. Even on an absolute basis, with temperatures in Canada moderating, this is most likely the coldest week we will see for the balance of the year. Another draw over 200 Bcf may or may not occur this year. There is becoming less and less of a chance for any deliverability issues this year.”
Looking back a little, low temperature records were shattered in the East during a frigid January while the West remained relatively temperate, said the Weather 2000 consulting firm Monday. “In some cities this was the coldest January witnessed in over 100 years! These records and statistics…are even more impressive considering they occurred during the climatologically coldest month of the year.”
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