Overall cash prices weakened Friday with the largest declines seen on the West Coast. Gulf Coast quotes were off about a dime, but prices into the Northeast moved higher as they followed surging electric power prices. Futures prices managed a gain as traders elected to cover shorts ahead of the weekend. At the close of futures trading February had added 7.3 cents to $2.678, which is 33.5 cents higher than the contract’s finish the previous week.

Perhaps making up for large drops on Wednesday and Thursday, eastern cash points for Monday delivery scored Friday’s significant gains. Gas at the Algonquin citygate gained more than 60 cents, and deliveries into Transco Zone 6 posted a stout gain of more than 50 cents. An eastern marketer pointed to the power market as impacting physical gas prices. “Power prices have been odd, and some of the gas-fired generation just isn’t running,” he said.

“We are finding that our customers are using more efficient gas units and the demand just isn’t there. It’s been an interesting week. Prices started out high [Friday] and then just dropped like a stone. Sometimes these guys aren’t sure if they are going to be running or not and then they are running hard or not running at all. A lot of these units are quick-start and suitable for peaking. That’s been a phenomenon all week.”

Next-day power prices at eastern points, true to their volatile nature, surged. According to IntercontinentalExchange, power for Monday delivery at PJM jumped $6.83 to $38.95 and Monday power into Nepool vaulted $7.38 to $38.64.

The marketer characterized February bidweek trading as “pretty slow. After last year’s January and February things are a lot warmer, and there is lots of gas around. I think index prices for February will be a lot lower than January.”

He estimated that “Algonquin-type” February indexes would be about $2.40 to $2.50 over the Henry Hub. “It’s been swinging around and has dropped a lot in the last couple of days. There certainly will not be an issue of not having enough gas.” He also thought Dawn would be about 43 cents over Henry.

Prices at Gulf points Friday were about a dime cheaper. Henry Hub was off by nine cents, and gas into Trunkline East Louisiana was lower by more than 10 cents. Gas delivered to Texas Eastern shed about the same.

Prices along the West Coast posted still deeper declines. Gas into Malin sagged almost 15 cents. PG&E citygate shed more than a dime and SoCal citygate was lower by close to 11 cents as an operational flow order was declared for Saturday by SoCal Gas.

AccuWeather.com predicted above-normal temperatures for the West Coast. Los Angeles Monday was expected to see a high of 71, three degrees above normal, and San Francisco was anticipated to see a high of 58, one degree above its seasonal norm.

Analysts suggest that producers can look forward to continued cutbacks in capital investment and production along the lines recently announced by Chesapeake Energy and Conoco. “The statements issued by Chesapeake and Conoco are likely to be the common denominator and we expect to see more announcements of cutbacks,” said Teri Viswanath, senior natural gas strategist with BNP Paribas.

“Fuel-switching within the electric power sector will act as a limited release valve to relieve excess supplies in the market,” she said during a conference call Friday.

Baker Hughes reported that gas-directed rigs inched lower for the week ended Jan. 27. It said gas rigs fell by three to 777, well below the 913 operating a year ago. Total U.S. rigs held steady at 2,008, nearly 16% more than the 1,732 active a year earlier, and the number of operating horizontal rigs rose by two to 1,185, nearly 22% above the tally of a year earlier.

Market technicians calculate that nearby futures need to fall another 30 cents in order for the pervasive downtrend to reassert itself. “Our concern for Thursday was the overbought intraday RSI [relative strength indicator],” said Brian LaRose, market analyst with United-ICAP. “The question now: is this pullback simply a relief retreat for the overbought intraday RSI or the end of a minor bear market correction? [We] see only one way to suggest the latter: break $2.316. Accomplish this and a test of $2.087-1.964 would be anticipated. Stay above $2.316 and the case for bottoming will remain intact.

Top analysts are looking out for renewed near-term strength, but longer term see the market drifting back down about another 35 cents. “Other than some possible pre-weekend short-covering ahead of potential shifts in the temperature forecasts, we see limited possibilities of much price strength in [Friday’s] trade,” said Jim Ritterbusch of Ritterbusch and Associates. “Additional headlines regarding production cuts could be forthcoming, [but] we feel that the major announcements from the large producers have already been seen and efficiently discounted this week. As a consequence, a counter-intuitive response to additional supply side news could be seen as was the case with [Thursday’s] storage release.

“All in all, we are forced to concede to an improved technical picture that allows for some additional price gains to as high as the $2.95 area per March futures. However, our long-term view still includes a re-test of this week’s lows [$2.23] looking out over the next three to four weeks,” he said in a morning note to clients.

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