Forecasts of sub-freezing lows Thursday from the Northeast southward into the Southeast and westward through the Midwest/Midcontinent into the Plains and Rockies resulted in more market strength Wednesday than a day earlier. However, it offered another demonstration of the fact that widespread heating load does not necessarily translate into much higher gas prices.
Of course, the 24.9-cent dive by March futures on Tuesday had a lot to do with a sizeable majority of points continuing to fall Wednesday by anywhere from 2-3 cents to about C25 cents (Westcoast Station 2). But with the last month of the traditional storage withdrawal season drawing near, it was highly probable that an increasing sense of urgency in meeting withdrawal schedules, whether mandated or not, continues to limit the spot market’s upside potential from cold weather.
Most of the flat to nearly a quarter higher quotes were in the Gulf Coast, with a sprinkling of them in the Midcontinent/Midwest. Whether up or down, price movement at most points was by less than a dime.
Transportation constraints were coming and going (see Transportation Notes). PG&E issued a low-inventory OFO, and MRT declared a System Protection Warning, both of which were to become effective Thursday. However, Northern Natural Gas is allowing a System Overrun Limitation for all market-area zones to lapse Thursday, only a day after it was implemented and despite a forecast for a Thursday low just above zero and a high in the mid to upper teens in Minneapolis-St. Paul, one of the pipeline’s biggest market areas.
The PG&E OFO failed to avert losses of about a nickel at Malin and nearly a dime at the PG&E citygate.
After basking in early spring-like conditions for some time, the South will be reminded Thursday that winter isn’t over yet. Nearly all of the below-freezing temperatures will occur east of the Mississippi River (except for a still-balmy Florida). Little Rock, AR, is expected to get down to the freezing level, but much of Louisiana and Texas will bottom out in the upper 30s and low 40s.
Most of Wednesday’s largest losses occurred at Northeast citygates, even though a snowy and windy storm will occupy much of the region Thursday. The Midwest was more responsive to a similar forecast, as Dawn and the MichCon citygate were the only mildly softer regional points while other delivery points were flat to about a nickel higher.
The West’s forecast is much the same as it has been for weeks: most of the severe cold concentrated in the Rockies and Western Canada, while ranging from chilly in the Pacific Northwest and Northern California to moderate in the Southwest and Southern California.
A marketer in the Upper Midwest said the current blast of cold in his area should last through the weekend, with temperatures then rising to above normal next week. Although natural gas prices have become much more to the liking of his company’s clients since last summer, he said he perceives the traditional energy markets as being in such disarray that he is pursuing a niche in the biofuels business.
SunTrust Robinson Humphrey analyst Cameron Horwitz expects a 45 Bcf storage withdrawal to be reported for the week ending Feb. 13.
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