The expiration-day plunge by November futures had the anticipated effect of dragging all cash points considerably lower Thursday. Also, warming trends in the Northeast and Rockies were reducing heating load further. The fact that Thursday’s deals included a weekend flow day (Saturday) because of the transition to a new month on Sunday added another modestly bearish element to the market.
Except for a dollar-plus drop by the Florida citygate, declines were fairly evenly spread across market areas in ranging from about a quarter to nearly 60 cents. However, Northeast citygates, where temperatures are getting remarkably moderate for the end of October, tended to lead the overall downturn.
The Energy Information Administration reported a 25 Bcf addition to storage for the week ending Oct. 23. Although the range of prior estimates by analysts was again large at 20-50 Bcf, there was a tighter consensus in the upper 20s Bcf area this time, so the report came in below most expectations. After seeming somewhat undecided about how to respond at first, Nymex traders finally pushed the December contract 0.4 cent lower in its prompt-month futures debut (see related story). This was overshadowed by major strength in the exchange’s petroleum-based offerings.
After enduring two days of heavy snow, the Rockies could expect some relief Friday from both the icy precipitation and lows in the 20-degree area, although regional temperatures were still expected to bottom out at below-freezing levels, according to the Weather Central forecasting service.
Commenting on the “winter wonderland” that the Rockies had become over the past couple of days, a regional producer said he “hopes our weather heads for Chicago,” where he believes it will be much more effective in rallying gas prices.
It appears that the producer will get his wish to some extent. The cold front that produced the Rockies snowstorm was moving eastward into the Plains Thursday, and although its primary effect on the Midwest was likely to be flood-producing rain, some wet snow was expected in the upper reaches of the region over the weekend, The Weather Channel said. And lows in the 30s will be reaching western sections of the Midwest as soon as Friday.
The Northern Natural Gas bulletin board confirmed that much of the Midwest will be getting quite a bit colder again this weekend. The pipeline’s normal system-weighted temperature is 43 degrees at this time of year, a posting said. Conditions will remain above normal for one more day with projected averages of 50 Thursday and 51 Friday, it said, but then the average is expected to drop to 44 Saturday and 41 Sunday.
However, this will be largely offset by the Northeast continuing to warm to above-average temperatures. Most of the South will remain mild to warm going into the weekend, and although Oklahoma, Texas, Arkansas and most of North Louisiana at the region’s western end are predicted to see sharp drops in mercury levels Friday, it will hardly be enough to make a major addition to heating demand.
Mostly moderate conditions are expected to prevail in the non-Rockies West, with even Phoenix in the desert Southwest having cooled to highs in the mid 60s Wednesday and Thursday and forecast to rebound to only the 70 area Friday. And a Denver-based source said the city should be peaking in the 60s Sunday.
The extension by Florida Gas Transmission of an Overage Alert Day into its third day Thursday, albeit at a looser imbalance tolerance (see Transportation Notes), failed to keep the Florida citygate and production-area numbers into Florida Gas Zones 1-3 from recording large losses.
Although the price downturn was substantial, IntercontinentalExchange (ICE) found a mixed bag of movement in volumes traded on its online platform. For example, while Henry Hub saw a tremendous drop from 889,400 MMBtu Wednesday to 550,200 MMBtu Thursday and NGPL-Midcontinent fell from 621,200 MMBtu to 402,200 MMBtu, such Northeast locations as Transco Zone 6-New York and Iroquois Zone 2 rose from 183,000 MMBtu to 206,700 MMBtu and from 60,400 MMBtu to 108,500 MMBtu, respectively, on those two days.
Kern River was among pipes reminding customers that Daylight Savings Time ends Sunday and clocks will be set back by one hour at 2 a.m. local time that morning. That will make the Oct. 31 gas day 25 hours long and this should be taken into account in scheduling gas volumes, Kern River said.
The general screen and cash strength during October, along with expectations of significantly colder weather starting by around the middle of November, are pointing to large gains in first-of-month indexes. Despite a big expiration-day drop, the November futures contract went off the board Wednesday at $4.289, which was 55.9 cents higher than October’s settlement.
A Texas-based marketer estimated the Chicago citygate index for November at $4.81, up nearly a dollar from $3.87 a month earlier.
He saw only a small chance of prices being able to rally Friday (when deals will be for Sunday-Monday flows). There won’t be much weather load in the Northeast, he noted, and although temperatures will be fairly cold in the Midwest early next week, they’re due to rebound by about midweek. He said he is looking for overall weakness to stick around in the cash market for the next week or two.
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