The amounts of decline tended to get smaller Thursday, but it was clear that the price direction remained definitively downward for the foreseeable future. Not counting flat to barely lower quotes at three western points, losses ranged from about a nickel to nearly 60 cents.
The smallest price drops were concentrated in the West, even with Southern California Gas extending a high-linepack OFO into its fifth day Friday. A mitigating factor to the OFO was a winter storm moving into the Pacific Northwest and northern Rockies.
But that storm was about the only positive fundamental for gas prices. Otherwise, mild conditions will dominate the weather outlook through the weekend, The Weather Channel said.
The Energy Information Administration’s report of a 6 Bcf withdrawal from storage during the week ended Nov. 12 was considered doubly bearish, both in comparison to the year-earlier pull of 32 Bcf and because the most recent draw fell short of most analysts’ prior estimates. A possible third negative aspect for prices is the fact that the Producing and West regions remained in net injection mode, with only the East region’s 11 Bcf withdrawal enabling a net decline. And as one source pointed out, this week’s relatively mild weather and the two-day-long Thanksgiving holiday celebration next week mean that the next two storage report could contain smaller withdrawals or even a small net injection.
Nymex traders obviously had a bearish take on the EIA announcement, sending December natural gas futures down 41 cents. They also took the crude oil and unleaded gasoline contracts lower, but generated a sizeable gain of 1.86 cents to $1.43/gal in heating oil as the government’s Wednesday morning of another fall in stockpiles of distillates (which include heating oil) continued to weigh on the market with the winter season rapidly approaching. FERC may have added to the heating oil bullishness with a report indicating a tight winter energy market in New England, a heavy user of heating oil (see related story).
The big screen drop, the general lack of either heating or cooling load, the bearish storage news and a weekend’s typical slump in industrial demand make further softening Friday a certainty, a marketer said. He was already seeing Henry Hub at $5.15 bid and $5.25 offered for the weekend Thursday afternoon, with the last deal on an online trading service at that point going for $5.25. That was more than 30 cents below Thursday’s Hub average in the high $5.50s.
A Gulf Coast trader said forecasts indicate that weather will remain too mild through Wednesday of next week to rally prices, and then the long holiday weekend arrives to keep further downward pressure on the market. Thus he sees little chance of any significant price rebound until possibly the very end of the month. The trader noted that a tremendous gap between physical Henry Hub numbers and the screen still exists, with the Hub averaging about $1.30 below the screen Thursday. Since a cash rally didn’t seem to be in the cards anytime soon, about the only way convergence could be achieved would be having December futures will continue coming down “a lot” between now and expiration day next Wednesday, he said.
Transportation issues are almost nil currently, the trader said. Florida Gas Transmission has a lot of maintenance work going on throughout November, he added, but it doesn’t seem to be affecting throughput much.
Minerals Management Service, now issuing twice-weekly reports on remaining Hurricane Ivan-related shut-ins of offshore production, said Thursday the outages had been reduced by a minuscule 0.69 MMcf/d to 678.47 MMcf/d from Monday’s level. Cumulative deferred production since Sept. 11 reached 122.342 Bcf, the agency said.
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