Moderating

Despite the moderating tropical weather picture, Raymond James analyst J. Marshall Adkins said the natural gas bulls have room to roam if the BTU-parity price ratio between natural gas and oil is a valid indicator. The analyst is expecting a full-year 2006 price of $7.54/MMBtu and a full-year 2007 price of $10/MMBtu.

The boost that prices got from unexpected cold weather in the first two days of the week came to an end in the East Wednesday as moderating trends were due to be under way. However, quotes continued to increase at most western points as winter storms rage through the region.

A screen plunge of nearly 90 cents the day before virtually assured further cash softness Friday, but the physical market also was depressed by moderating trends from the heating load created by widespread severely cold weather in the first half of the week and by the drop in industrial load that occurs over a weekend.

Cash prices fell between 5 and 20 cents at most locations across the U.S. on Monday in response to slightly moderating futures prices and somewhat lower temperatures outside the Southeastern quadrant of the nation where the heat continued to push mercury into the low to mid 90s. However, some locations, such as Algonquin Citygate and Niagara in the East, MichCon in the Midwest and San Juan Basin points in the West, saw even larger drops.

The combination of softer crude oil prices and forecasts calling for moderating temperatures were enough to keep the bulls corralled Monday as the natural gas market eased from Friday’s 30-month highs. Monday’s price softness led September futures to a low of $9.38, but buyers stepped in and the contract closed for the day at $9.54, down 4.8 cents for the session.

Moderating temperatures in the Midwest and parts of the Northeast caused most points to drop anywhere from about a nickel to a little more than a quarter in Thursday’s launch of the July aftermarket. But above normal temperatures forecast for Friday and Saturday in much of the West allowed many (though not all) points in that region to record fairly strong gains ranging from about 15 cent to around 35 cents.

The market is starting to lose some heating load in the South due to moderating weather trends, but enough of it will remain Thursday in the Midwest and Northeast that prices were in a climbing pattern at all points Wednesday. Cash numbers also derived support from significant day-earlier advances across Nymex’s energy futures complex.

End-of-January prices reacted to moderating weather trends (either already under way or impending), Thursday’s screen loss of a dime, and lower weekend industrial load by dropping across the board Friday. The Northeast again was far out in front in leading the charge downward with multi-dollar plunges that had citygates returning to something more closely resembling “normal” levels.

Forecasts may be moderating, but two major eastern utilities reported setting some new gas and power send-out records Monday. Consolidated Edison (ConEd) pinpointed the average temperature in its New York City area over the 24-hour period of Dec. 20 at 15 degrees Fahrenheit.