As baseball great Yogi Berra might have observed about the spot gas market, it was like deja vu all over again. For the second Monday in a row, prices were up sharply at most points for much the same reason: weather turned out to be colder than forecasts had indicated.
Monday’s main diversion from the week-earlier pattern was that several points in the West were flat to nearly a dime softer. Otherwise most gains ranged from about a dime to 30 cents, but Dominion in Appalachia surged by nearly half a dollar and Northeast citygates, where conditions resembling the dead of winter were setting in through at least midweek, recorded spikes that were biggest in New England. Dracut soared by nearly $2, with some quotes topping $7.00.
Dracut traders had to play some catch-up because of a Sunday restriction on Maritimes & Northeast (see Transportation Notes), one source said. But more than that, he continued, the spikes at Dracut and elsewhere in the Northeast reflected the fact that the region turned “substantially colder than expected” over the long weekend. This caused supplies to fall short of what had been nominated for the holiday period while people were away from the office for a longer period than usual, so many were buying extra gas for imbalance makeups Monday, he said. “There was also a lot of intraday action” due to the unexpected cold, the source added. However, market-area numbers should be getting back to more normal spreads from the production area towards the end of the week as temperatures are expected to get warmer in the region this weekend.
Lows close to or below freezing were occurring across the rest of the northern half of the U.S., but conditions there were not quite as severe as in the Northeast. However, they’re likely to last longer, though, according to a Midcontinent/Midwest marketer. “We’re supposed to stay cold through the weekend, and probably will be getting snow this week,” he said.
The marketer observed that he’s not hearing much talk in the trading community about how misleading some recent temperature prognostications, particularly by the National Weather Service, have been. Bad forecasts “have been going on for a long time, so they’re kind of taken for granted. Most forecasters will admit to you that their next-day forecasts have about an 80% chance of accuracy, but that slips to 50% or less when they try to look five days out.”
A soaring screen Monday (up nearly 36 cents in January gas futures, despite slippage in the oil product contracts) should keep cash stronger for at least another day or two, the marketer said. Meanwhile the market is “real quiet.” Many utilities have up to 80-90% of their supplies termed up or otherwise already arranged, so their spot market are relatively light for now, he said. “That’s let us start thinking about first quarter 2004 deals, and some are even looking as far ahead as next summer.”
In its medium-term forecast for Dec. 6-10, NWS expects above normal temperatures everywhere in the Lower 48 states except for normal conditions in the Southwest. In fact, the only area where it looks for below normal temperatures is a small strip around San Diego.
In contrast to the frigid climate in the North, the South and Southwest are relatively balmy with moderate to cool temperatures. Much of the West is emerging from a lengthy period in which its thermometer readings have been significantly lower than in the East, thus dampening demand and causing softness at some western points. In addition, PG&E had called a high-linepack inventory Saturday (see Transportation Notes), although it rescinded the order Sunday.
A producer commented that it wasn’t as cold in Alberta Monday as it had been last week. However, there must be some production glitches occurring, he said, because field receipts on NOVA “fell noticeably” in the last few days.
Citigroup analyst Kyle Cooper said he expects the Energy Information Administration to report a storage withdrawal of 32-42 Bcf for last week. The volume would compare with year-ago and five-year average pulls of 91 Bcf and 29 Bcf respectively.
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