Physical gas prices slipped 3 cents overall on average with some strength working its way into the market, but not enough to counteract Northeast weakness.
Rocky Mountain points pricing gas headed to California were generally firm. The Energy Information Administration (EIA) reported a withdrawal of 201 Bcf, far greater than street expectations of about 15 Bcf lower. Prices jumped and managed to hold the gains throughout the session. February gained 8.0 cents to $3.193 and March rose 7.7 cents to $3.208. February crude oil gained 72 cents to $93.82/bbl.
Most traders at northeast points got their deals done before the release of the EIA storage figures, but a few had to buy after the data had made its way into the markets. “Some buyers had to step up to pay the [higher] price, but it wasn’t that big of a deal,” said a Houston based marketer.
“The people that need the gas are going to say, ‘I’ve been had, and my numbers are late and now I have to buy.’ The people that have the gas can kind of dictate their price, but it goes the other way, too. A power plant could have called after the normal 10 a.m. EST deadline, or they just couldn’t get it all in time, they have 85,000 Dth and they need 150,000, things like that.”
As far as the cold weather forecast for next week, the marketer said that really didn’t affect his trading plans. “We’ll just buy what gas we need. We have a retailer who buys on daily index prices, and we’ll factor that into what we buy at the first of the month and the rest we pay the daily index and everyone is happy with that.”
“Going forward, in February and March prices have gotten detached from recent highs. February Algonquin is going for $3.55. March basis [Algonquin] is $1.91, and that is up from $1.80 Wednesday. Thursday we are trading about $1 basis-wise. We sold $2.16 March Algonquin basis last week,” he said.
Forecasts called for temperatures at major eastern locations to dip Friday before rising into the weekend. Wunderground.com predicted that Boston’s Thursday high of 47 would drop to 45 Friday before making it to 54 on Saturday. The normal high in Boston is 36. In New York the high Thursday of 52 was expected to ease to 48 Friday before rising to 54 on Saturday. The seasonal high in New York is 38. Temperatures in Philadelphia were also expected to remain well above normal. Thursday’s high of 50 was seen sliding to 48 Friday before rising to 55 on Saturday. The normal high for Philadelphia at this time of year is 38.
The National Weather Service in New York City said “high pressure remains over the region tonight [Thursday]. Weak low pressure will approach from the west on Friday and pass nearby Friday night into early Saturday morning. Weak high pressure builds into the area on Saturday as a cold front approaches from the west.
“The front will move into the local area on Monday…possibly stalling over or nearby as a series of low pressure systems track through the area into the middle of next week. Another cold front approaches on Thursday.”
Quotes at Algonquin Citygate dropped 27 cents to $4.14, and deliveries into Iroquois Waddington slipped 13 cents to $3.95. Gas into Tennessee Zone 6 200 L shed 29 cents to $4.06.
More southerly delivery points also fell. Gas on Dominion was seen 4 cents lower at $2.99, and Friday parcels on Tetco M-3 fell 6 cents to $3.26. New York City-bound gas on Transco Zone 6 fell 7 cents to $3.26.
Out west prices were mostly within a couple of pennies of unchanged. Malin was seen at $3.30, up a cent, and deliveries to PG&E Citygate added a penny to $3.49. SoCal Citygate was quoted at $3.49, flat, and SoCal Border came in at $3.35, 3 cents lower. El Paso S Mainline fell 2 cents to $3.42.
Opal was seen higher by 4 cents to $3.24, and Northwest Pipeline Wyoming added 2 cents to $3.21.
Futures traders see temporary strength off the supportive EIA storage data, but an eventual slide lower; “$3.21 was a resistance number and I think we’ll get above it Friday with a little bit of short covering before the weekend. We could trade up to $3.25, but then I think we’ll trade back down.
“We are not getting cold weather until the end of next week and we will be cold for five or six days and then get mild the following week. It’s short-lived,” he said.
Longer-term weather forecasts overnight turned ever so slightly cooler for northeast energy markets. Matt Rogers of Commodity Weather Group saw a “slightly warmer Midwest and same-to-colder Northeast for six-10 Day.” Late in the six- to 10-day period and early in the 11- to15-day he sees “colder risks with warming again by late. Competing polar and Pacific influences [are] keeping six-15 day confidence very low,” he said in a morning note to clients.
Analysts continue to see a bearish tone to the market as weather has continued to disappoint the bullish camp. Tim Evans of Citi Futures Perspective noted “ongoing disappointment that temperatures this winter have been less supportive than the more normal readings that had been broadly anticipated. Through Jan. 5, the National Weather Service gas home heating customer-weighted degree day accumulations have been 5% more than a year ago but lagged the 30-year norm.”
Evans suggested that Thursdays inventory report would show a 180 Bcf withdrawal and said this may set up a bearish surprise inasmuch as news wire surveys are closer to 185 Bcf to 190 Bcf.
“Although the storage report may look supportive given a projected net withdrawal greater than the 132 Bcf five-year average, the generally milder temperatures going forward are likely to translate into bearish comparisons.”
“It’s also worth noting that by Jan. 25, the heating season will be approaching its midpoint, with temperatures to begin rising seasonally as we move into February. There may still be a chance for prices to stage an intermediate-term rally were a stable cold weather pattern to come along, but real physical tightness by the end of the season is becoming less of a possibility.”
Expectations for the 10:30 a.m. EST release of Energy Information Administration storage data came in somewhat greater than Evans’ estimates. IAF Advisors of Houston calculated a 191 Bcf withdrawal, and the Energy Metro Desk survey showed a 188 Bcf pull. Bentek Energy predicted a 198 Bcf decline. Last year 90 Bcf was withdrawn, and the five year average is for a 132 Bcf withdrawal.
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