Mild

Citigroup lowered its gas producer stock ratings Tuesday because of high natural gas storage levels, current mild temperatures, growing domestic gas production and expectations for more liquefied natural gas imports (LNG). Citigroup producer analyst Gil Lang also cut his first quarter 2007 and second quarter 2007 Henry Hub price forecasts.

An expiration-day screen dive of more than 30 cents and light heating demand because of mild weather were chiefly responsible for falling prices across the board Thursday. Of course, the long-established conditions of a major storage surplus and the absence of a major hurricane threat to Gulf of Mexico production in a rapidly waning hurricane season also acted as a drag on the market.

Power generation demand was rising only marginally as conditions remain rather mild across Canada and most of the northern half of the U.S. However, the cash market used prior-day screen support, expectations of a very low storage injection in the previous week (and quite possibly another unusual midsummer pull), and the quite strong cooling load being experienced throughout the southern U.S. to record sizeable gains across the board Wednesday.

As the mild winter continues to wind down, the natural gas industry — in looking for the next gas price indicators — will soon change focus to the summer cooling season and the Atlantic hurricane season.

As the mild winter continues to wind down, the natural gas industry — in looking for the next gas price indicators — will soon change focus to the summer cooling season and the Atlantic hurricane season.

Noting unseasonably mild conditions being predicted in its market area for the upcoming weekend and several days thereafter, Transco said effective with Friday’s gas day until further notice it will not allow any excess storage injections under Rate Schedules WSS, WSS-OA or GSS, nor will it allow any due-pipeline imbalance paybacks. Also, pool tolerances were to be reduced to 1% starting with Evening Cycle nominations for Friday, and the pipeline is barring any incremental Park service quantities and the payback of any Loans under Rate Schedule PAL (Park and Loan).

Mild winter weather and sharply falling commodity costs have led utilities across the country to reduce their rates. Philadelphia-based PECO said this week that it will reduce its commodity rate by 6.5% as of March 1, resulting in lower natural gas bills for the company’s suburban natural gas customers. The commodity charge makes up more than 80% of the total gas rate, which will drop by 5.2%.

As natural gas prices continue to fall due to mild weather this winter, AGL Resources subsidiary Virginia Natural Gas (VNG) on Thursday announced a 13% reduction in the company’s purchased gas costs (PGC), which will save the average residential customer a total of $44 in February and March.

The political backlash from high winter heating bills may not be nearly as severe as first expected because mild weather has pulled the rug out from under wholesale prices. Consumers Energy said Wednesday that its customers can expect about half of the increase in prices that the utility previously projected.