The cash market failed to derive much new strength Wednesday from a polar air mass continuing to dominate the weather picture in the northern half of the U.S. from the Rockies eastward and starting to spread into parts of the Southeast, not to mention a soaring screen. Instead, most points ranged from a nickel or so higher to down about 20 cents, with considerably greater declines recorded at Northeast citygates.
Algonquin citygates, which had peaked at $9.50 the day before, topped out at only $8.65 Wednesday and fell about 80 cents on average into the mid $8.00s.
The icy and snowy conditions that are expected to continue plaguing the Midwest and Northeast into the weekend will move eastward from Missouri and northern Arkansas into Kentucky and Tennessee Wednesday and eventually occupy the northern portions of Mississippi, Alabama and Georgia, according to The Weather Channel. By Friday, winter storms will be visiting the western Carolinas and southern Virginia, it added.
In addition to new OFOs being declared by Northern Natural Gas and Sonat (see Transportation Notes) and Florida Gas Transmission extending its Overage Alert Day (OAD) notice into at least a third day, Tennessee told shippers that it anticipates much colder temperatures in the supply area over the next several days that “are likely to cause loss of production due to [wellhead] freeze-offs.” If necessary, it will declare an OFO if such conditions threaten system integrity, Tennessee said.
However, NGI sources tended to downplay such talk. “I think the freeze-off notice was just a pre-emptive strike by Tennessee” to try to get customers to watch their daily balancing more carefully, a Gulf Coast marketer said. He saw a possibility for “a few” land wells to freeze up, but not offshore, saying, “It won’t get that cold” in the Gulf of Mexico.
Although he doesn’t trade on Tennessee, a western marketer also didn’t expect any significant production losses from frozen wellheads. Most of the “extreme cold” is north of Oklahoma, he pointed out, although he conceded that meant Kansas might be a candidate for freeze losses.
A Midcontinent trader also questioned the likelihood of any wellheads freezing. “It would sure surprise me. Little Rock [AR] is seeing lows in the upper 20s, so I doubt that any production area would be getting cold enough. Rumors like those sometimes make me wonder if [people] are trying to jack up prices.”
One source said he didn’t know why the screen made a big run-up of more than 30 cents, “but it doesn’t take that much to push Nymex around these days.” Another trader said that while the gas contract appeared to ignore Tuesday’s strength in the neighboring crude oil and heating oil pits, he thought gas probably followed oil higher Wednesday. Crude gained nearly a dollar and settled above $33/bbl after a drop in stockpiles was reported. Both sources said cash likely will get a moderately firming influence Thursday from Wednesday’s futures gain.
A Florida utility buyer expects FGT to keep its most recent OAD in place for a while longer “because we’ll stay cold through the weekend.” In fact, he thought the pipeline “could have a real problem” Saturday and Sunday because a lot of Florida is expected to experience temperatures in the 30s then. Despite the forecast, Florida citygates fell a dime into the mid $5.40s.
The expected spread of a cold front into Texas Thursday was a key to small upticks at Waha and El Paso-Permian, a western marketer said. “I’ve had days recently when the phone line stayed quiet, but today [Wednesday] was one of those when it rang frequently.” Most Waha and Permian gas was going east to meet intrastate Texas demand or north to Northern Natural demarcation point, he said.
“It will be interesting to see what happens with storage tomorrow [Thursday],” a Gulf Coast producer said. “Our guys are expecting a 110-120 Bcf withdrawal, but a lot of people say it will be below 100. I’m guessing it will be at least 120, but I have been wrong so much lately.” The market will remain strong even if the EIA’s estimate is low, he said, because weather fundamentals will keep prices high. “The next report [on Jan. 23] will be huge, 200 Bcf or more,” he predicted.
The screen spike took some production-area cash with it, the producer continued, but the market area came down, “bringing in the spreads.” Long-haul transport was getting cut on some pipes, “even Secondary Firm,” he added.
Meanwhile, a marketer commented, “Our storage guys are calling for a 130 Bcf withdrawal” in Thursday morning’s report. “But I haven’t heard much. There used to be office pools on this stuff, but not any more. The fun has been sucked out of our industry.”
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