Spikes

A less than 20% chance exists that this winter will be warm enough to cause U.S. natural gas prices to fall significantly below $4.50/Mcf, and more likely a 30% chance that prices will spike even higher than an expected average of $4.50-$6.50/Mcf, Raymond James analysts noted in the latest “Stat of the Week.”

Continued Nymex upticks Friday following Thursday’s energy futures spikes proved strong enough to offset generally mild weather forecasts and rally weekend cash prices at nearly all points.

Prices surprised more than a few traders Friday by staging a moderate rally in the face of weakening weather fundamentals and the industrial demand slump that accompanies a weekend period. A few scattered points were essentially flat, while increases ranged from as little as 2-3 cents to about a dime.

Prices relied on Monday’s return of industrial load after the weekend and perceptions of hotter weather later this week in some locations to realize mostly moderate rebounds from Friday’s plunges. Eastern points tended to range from down a few pennies to 20 cents higher. The West recorded similar movement at some points but also saw even larger gains close to half a dollar at the Southern California border and PG&E citygate and around 30 cents or so in the San Juan Basin.

As on the preceding Friday, price movement divided roughly on geographical lines again Monday. But this time it was western points seeing mostly strength, while the East turned in a mixed performance with only few points varying much more than a nickel up or down from flat.

The winter of 2002/03 doesn’t seem to realize its time is up. Snow and ice storms scattered from the central Plains through the Midwest and Northeast resulted in gains ranging from about a nickel to 45 cents in non-Rockies/San Juan Basin markets Monday, although a couple of scattered points barely eked out any increase at all.

Except for triple-digit advances for Dominion and Northeast citygates, the major volatility of recent days continued to subside Wednesday. It was also a second straight day of mixed price movement. Most of the East shared the Northeast-Dominion firmness but with much smaller increases; however, Chicago citygates and NGPL-Midcontinent saw drops of up to about 70 cents after a winter storm had moved eastward out of the Midwest market area.

For utilities and end-users still shell-shocked from the sky-high spikes of Monday and Tuesday, it may have seemed like re-entering a nightmare they thought they had already awakened from. Dollar-plus price gains — often plus much more than a dollar — were back in vogue Friday, as traders shrugged off the normal demand slump that accompanies a weekend and focused instead on a screen advance of more than 60 cents and prospects that this week largely will repeat the cold-weather pattern of the previous one.

Senate Minority Leader Tom Daschle (D-SD) last week called on the Department of Energy (DOE) to begin a federal investigation into the causes for the recent spike in natural gas prices across the nation and particularly in his home state of South Dakota.