Is the cash market staring into a price abyss? It may have seemed so to some traders Tuesday as dollar-or-more plunges in several markets (Northeast, Dominion, Michigan citygates, Dawn and Western Canada) led a continued overall cratering of cash numbers. Losses at other points tended to range from small (Rockies and San Juan Basin) to 80-90 cents (Chicago).
Despite freezing temperatures and snowy conditions lingering Tuesday in the Upper Plains, Upper Midwest and Western Canada regions, the rest of the continent appears to have escaped The Big Chill of the 2002/03 winter. And although the National Weather Service looks for below normal temperatures next week in nearly all of the U.S. from the Rocky Mountains westward, the outlook is for above normal for everything east of a line between the western Dakotas and East Texas.
The upper Northeast can expect another cold front Wednesday, according to The Weather Channel, but it’s not expected to be nearly as severe as its recent predecessors. Meanwhile, spring has definitely sprung in the South and is making itself felt in the form of falling gas load.
The screen’s swan dive the day before created a bearish mood even before cash trading began, and a subsequent plunge of more than half a dollar Tuesday at Nymex only increased the momentum of the downhill slide. Heating oil futures also were taking it on the chin, while the crude oil contract sustained a more moderate decline.
A Northeast utility buyer reporting Texas Eastern M-3 going from $7.80 early to $7.30 late said the futures plunge helped push already weak cash numbers even lower. “Loads are diminishing rapidly.” He noted that the screen was trading back up to the low $6.00s in late afternoon following a daily settlement at $5.944, but he didn’t see that as a significant rebound. Prices should keep falling Wednesday based mainly on the intermediate-term weather forecasts, the buyer said.
Strong storage pulls around bidweek and cold weather helped build early-March prices to super-high levels, according to a Gulf Coast marketer, “and that’s why we’re seeing such major cratering in the market now that the fundamental supports are being removed.”
A Canadian producer who sold a Chicago citygate package early in the mid $6.40s said there was a later rebound that took quotes as high as the low $6.60s, but she couldn’t see any reason for it in light of the plunge at Nymex. It was still freezing and snowing around Calgary, the producer said. “We’re supposed to thaw out by the weekend, but I’ll believe it when I feel it.”
One source noted that some forecasters had called for warmer weather to arrive by mid-March while others looked for continued cold through the end of the month. “Looks like the warm-weather guys won for a change,” he said.
Not so fast, says Weather 2000 of New York City in a Tuesday advisory. “Forecasts can have biases, good and bad track records, and varying levels of confidences associated with them, but observations do not. Once temperatures and weather actually occur, there is no longer a debate, because it is what it is. So before we examine the upcoming forecast, let’s quickly look at what has happened and where we are now: [Monday] Minneapolis reached a frigid low of -8 degrees, while Chicago plummeted to a record of 2 degrees. New York City was only able to reach a sub-freezing afternoon high of 29 degrees. [On Tuesday] Washington, DC and northern Virginia are not enjoying the blooming of cherry blossoms but rather contending with snowfall…[T]hrough the first third of March 2003, the nation is dealing with one of its chilliest Marches ever.”
The consulting firm continued in question-and-answer format:
Q. Since models and other forecasts have once again completely underestimated the national cold of March 1-11, should I discount these super-warm forecasts again?
A. Models and other forecasts miscalculated the March cold to date, for a variety of reasons involving poor incorporation of snowpack, tele-connections, short-waves, etc…Although milder-than-normal temperature will definitely be achieved in several regions sometime in the week ahead, they still will not likely be as warm or as long-lasting as these other sources are indicating.
Q. Is this milder weather engulfing the entire nation, similar to how the cold weather engulfed the entire nation in February?
A. No.The mild weather will definitely have a north-central U.S. focus. Locations (1.) closest to the epicenter of this ridging (south-central Canada), (2.) within the environment of down-sloping winds (such as Northern Plains’ Chinook), and (3.) with the least amount of snow and/or underlying drought conditions (Central Plains, Mid-Mississippi Valley and Ohio Valley) will see the greatest anomalies.
Q. Is this “warming” enough to negate or offset the record cold of the 2002-2003 heating season?
A. Not at all. Enough cold and Heating Degree Days have been accumulated since October 2002 that even if every location had Miami-like temperatures from here on out, the national HDD totals have already surpassed once-in-quarter-century levels. We’re already in the record books.
Q. How long will the anomalously mild weather last? Is winter weather over?
A. …On a practical level, we are expecting below normal temperatures to rapidly return to the Southern Plains and Texas by next Tuesday, storminess to increase over the eastern half of the U.S. (with cloud/rain-induced cooling across the South), and short-wave impulses to once again traverse across North Central and eventually the Northeast of the U.S., commencing in the middle of next week, once again bringing much chillier air down from Canada.
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