As NGI sources had predicted, late declines in Monday’s swing trading were a strong indicator that the cold weather-induced price spikes that began the week had little staying power. Sure enough, quotes Tuesday ranged from flat to down about a quarter in deals covering through the end of the month.
Tuesday’s severe cold was probably the most pervasive so far in the young heating season, but some moderation was predicted for Wednesday, particularly in the South and in lower sections of the Midwest/Midcontinent and Northeast. However, the Pacific Northwest and upper reaches of the Rockies will continue to experience freezing conditions and snow for a while longer, making holiday travel in the region a challenge.
Despite overall softness, prices were making strong gains in late deals Tuesday, said a producer who pointed out that Henry Hub wound up the day as high as the $4.60s after starting in the $4.30s. As a result, he expects expect first-only prices to be very strong Wednesday, noting that they will cover a weekday flow period and not be subject to the demand slump associated with a longer-than-usual holiday weekend. The expiration-day surge of December futures (up 17.8 cents) also provides a firm foundation for first-of-month swing gas, the producer observed.
An end-user who usually shuns the daily market said he had to sell a small package on Sonat due to end-of-month balancing requirements.
A marketer said there were no problems in handling the potentially variable loads over the course of five-day deals. People knew the situation was coming up and thus all her customers were prepared to adjust as needed with storage.
Wednesday’s storage report from the Energy Information Administration likely will have much less impact on trading psychology than usual. Not only do most prior expectations center around an unchanged inventory (that is, little or no injection or withdrawal), but the rush to leave early for the Thanksgiving weekend — along with those already on holiday — will leave few in the office to reflect on the report’s significance, one source said.
Swing numbers for the end of November may have been retreating, but bidweek prices continued to advance a bit Tuesday as virtually all remaining December business got wrapped up. The burst of cold weather this week may have influenced many traders to avoid entering the month in short supply positions and thus they were making extra purchases Tuesday that might not have gotten done in milder conditions, a marketer suggested.
Saying he hated to do it, an industrial buyer reported paying larger than usual premiums to index in several deals. His Chicago citygates got as high as the NGI index plus 6 cents, he said. “It was an extremely difficult bidweek because so many people wanted to finish early,” which probably contributed to the strength of index premiums, especially in post-weekend trading, he added.
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