Cash market prices overall tumbled just above 8 cents Wednesday as traders noted a market lacking bids. An outage lifted Florida Gas Transmission into the plus column, but Gulf, West Coast, and Rockies points all slid close to a dime.
Northeast points fell even further. At the close of futures trading the April futures contract had fallen 5.4 cents to $2.302 and May had retreated 6.2 cents to $2.400. April crude oil rose $1.46 to $106.16/bbl.
Florida Gas Transmission registered the lone gain of all pricing points, but that was due to unscheduled maintenance. “We are seeing a compressor station undergoing unplanned maintenance this morning, and that will cut the flow to half of what goes through that point,” said a Florida utility buyer. “We had to pull some gas from storage and filled with Zone 3 after 9 a.m.” The buyer remarked that typically between the three zones prices were normally flat, “but today you saw a 12-13 cent difference between the zones. I expect prices o settle back down once the maintenance is complete.”
Next-day gas on Florida Gas Transmission Zone 3 rose a couple of cents to $2.35.
The buyer noted that this could be a good time to take down storage to make up for the lower volumes. “It just depends on what [the] WACOG [weighted average cost of gas] is, but there is so much cheaper gas on the market than usual; that is why people are sitting on their gas and not doing anything with it. There are storage facilities that make you take gas out, but ours is not one of them. We have our storage gas completely hedged, so to take it out, you are going to either lose money on the physical transaction or make it up on the financial side,” he said.
Other Gulf points were more representative of the market as a whole. Next-day gas on ANR SE, Texas Eastern E LA and Columbia Gulf Mainline were a little more than a nickel lower.
On the West Coast prices slumped as well. “We haven’t had a winter, and there is only one direction for prices to go, down,” said a California markets trader. “From the time we started trading today, every BALMO is offered. I don’t see anything showing strength out there right now. BALMO PG&E Citygate is $2.44 bid and $2.46 offered. BALMO Rockies was trading Tuesday at $2.15 and it is offered at $2.10. The whole complex is just off.”
Quotes at California points were down as well. Next-day gas at PG&E Citygate fell almost a nickel, but SoCal Border was off by nearly a dime.
Rockies points fared little better. Malin deliveries shed almost a nickel and Northwest Wyoming Pool dropped just over a mickel.
The ever-volatile Northeast remained true to its colors with losses outpacing most other points. Next-day gas into the Algonquin Citygate dropped almost 15 cents and deliveries to Iroquois Waddington shed just shy of a quarter. Quotes on Tennessee Zone 6 200 L fell a dime.
The high in Boston Thursday is expected to reach 63, which is 20 degrees above normal, according to The Weather Channel.
Futures traders saw important market support dissipating. “It looks like winter might be over,” said a New York floor trader. “The factors that were propping it up from these levels before are going to have a hard time convincing the market that it should be back up the other way. The fear could be that even with cuts in production, there is still plenty of supply. I have a circle around $1.80.”
Those fears may become more apparent with the 10:30 a.m. release on Thursday of Energy Information Administration (EIA) storage figures that are expected to show a withdrawal greater than last year, but less than the five-year average.
Last Friday Energy Metro Desk published an early survey showing an expected withdrawal for the week ended March 2 of 83 Bcf. The survey queried 12 market analysts and had a range of 70 Bcf to 95 Bcf. A more recent poll of 25 analysts conducted by Reuters showed an average of 84 Bcf with a range of 56 Bcf to 93 Bcf. Ritterbusch and Associates forecasts a draw of 81 Bcf and Bentek Energy, utilizing its North American flow model, is looking for a pull of 87 Bcf. Last year 63 Bcf was withdrawn and the five-year average is for a decline of 92 Bcf.
Analysts see the inventory report as guiding the market for the next week. “This week’s underground storage report may be the last to show a decent drawdown, especially if forecasts for a warmer-than-average March come true,” said Peter Beutel of Daily Oil Hedger. In his view, there is “no reason to expect anything different, actually. How it turns out will actually act to instruct traders over the next week or so. We are already looking at heavy surpluses against year-ago and five-year-average levels, and we had a drawdown of 71 Bcf a year ago with the five-year average coming in at 99 Bcf.”
Technical analysts see a breach of the low $2.20s as signaling further, perhaps extreme, weakness. “Peg $2.237-2.264-2.229 as the lowest levels consistent with a corrective retreat,” said Brian LaRose, an analyst with United-ICAP. If spot futures “can carve out a bottom from this support zone we will have a case for another leg up in this seasonal cycle. Fail to turn higher and an immediate test of $2.087-1.964 support will be on tap.” On a more ominous note LaRose contends that if the market were to break recent lows at $2.231, that “opens up room down to $1.074-0.876!”
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