Following a brutally cold and snowy Martin Luther King Day weekend for most of the U.S. and Canada, the forecast looked to be more of the same for the next couple of days before a moderate warm-up begins late this week. But despite the continuation of heavy heating load prices fell Tuesday at all points, including triple-digit plunges at Northeast citygates.
Increased use of storage, which would tend to reduce spot gas purchases, seemed like the most reasonable explanation for the cash weakness, although an 8.8-cent decline by February futures on the preceding Friday — the contract’s fourth consecutive losing session — provided some negative guidance for Tuesday’s physical market.
Westcoast Station 2 and Sumas were the only two points down by less than a dime. They got some support both from reduced output at Westcoast’s Pine River Gas Plant due to a sulfur train problem and Northwest Pipeline’s continuation of a Stage II entitlement north of Kemmerer Compressor Station in Wyoming (see Transportation Notes).
Otherwise, losses ranged from about C25 cents (NOVA Inventory Transfer) to $6.25 or so (Iroquois Zone 2). Despite their big falls, Northeast citygates still averaged in the four digits and $18.50 was the top quote for Transco Zone 6-New York City.
Cash numbers will have difficulty in attempting a rally Wednesday after natural gas futures plunged by 32.3 cents Tuesday.
There’s no denying that heating load for gas remained plentiful Tuesday. Sub-zero lows were in the Wednesday forecast for a number of locations in the Midwest and upper New England, while temperatures in other sections of those regions were expected to bottom out in the teens and single digits. A new arctic front will be marching through the Midwest Wednesday, said The Weather Channel, preceding milder air pushing in from the west late in the week and over the weekend.
The South isn’t quite as cold as more northerly market areas, but for the most part it can still expect lows slightly below freezing Wednesday. The area from West Texas through Southern California will be merely chilly in relation to the rest of the U.S., but much of the Rockies will fail to get above freezing Wednesday.
Southern Natural Gas ended an OFO but said two new ones will become effective Thursday (see Transportation Notes). Similarly, Texas Eastern restricted imbalance restrictions for Tuesday and Wednesday but said they will be reinstated Thursday.
The trading representative for several independent producers said she had to assume that increasing use of storage was the chief reason for falling prices even with northern market areas remaining in a deep freeze. However, she thought an early Tuesday plunge of more than $3/bbl by crude oil futures might have had a tangential impact on cash gas prices (crude later recovered much of its loss to end the day down by less than a dollar).
The trader said a customer had told her at lunch that no matter how cold it gets, there’s not enough time left to pull storage accounts down to desired levels by the end of the heating season this year. To the trader, that means end-users and utilities are intensifying their efforts to draw on storage and cutting back their purchases of spot gas. She said she had thought there would be mostly firmer prices this week due to the harsh winter weather until a moderating trend begins around Friday.
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