Cash natural gas prices on average gained more than 15 cents Thursday, but if volatile and constrained points such as New York and New England are factored out, the overall gain was just over a couple of pennies.
The Energy Information Administration (EIA) reported a withdrawal from storage of 148 Bcf and generally caught traders off guard. Expectations were in the mid-130 Bcf area. February futures gained 5.9 cents to $3.494 and March added 5.8 cents to $3.495. February crude oil rose $1.25 to $95.49/bbl.
New England and Northeast points led the market higher. Some pipelines posted restrictions, but in the eyes of traders the extreme advances “are all about the cold weather.
“All the demand gets concentrated in the market area and that’s where all the gas is trying to head. It’s the same on Tennessee and Algonquin,” said a Houston-based marketer. “Mid-point in the pipe [Algonquin] is restricted from the south to the north, but they just keep adding restrictions along the way. It’s just one long pipe that doesn’t have much storage connected to it so there is not a lot of optionality.”
Algonquin restricted interruptible nominations upstream of its Stony Point, Oxford and Cromwell compressor stations.
Yo-yo like temperatures are expected for the next few days. Forecaster Wunderground.com said Thursday’s high of 45 in Boston was expected to drop to 27 on Friday before warming to 50 on Sunday. Monday’s high, however, was expected to plunge to 32. The normal high in Boston is 35 at this time of year. In New York Friday’s high of 47 was anticipated to fall to 34 before reaching 52 on Sunday. Monday’s high is expected to reach only 30. The normal high in New York at this time of year is 38.
The National Weather Service in southeast Massachusetts said “low pressure passing well southeast of the region will graze southeast New England with a period of light snow later [Thursday night] into early Friday. Drier and much colder weather follows Friday. Moderating temperatures are expected this weekend…then an Arctic cold front will move through on Sunday, delivering much cooler weather early next week. [A] possible coastal storm on Monday night may bring some snow accumulation for [C]ape [Cod]/islands.”
Friday deliveries on Algonquin were quoted at $11.31, up a whopping $2.33, and deliveries on Tennessee Zone 6 200 L jumped about $2.11 to $11.05. Gas into Iroquois Waddington slipped 18 cents to $5.55.
Deliveries into New York City on Transco Zone 6 were near the top of the leader board with a gain of $3.46 to $9.38, but to the south gas on Tetco M-3 rose by a comparatively nominal 27 cents to $4.08. On Dominion next-day parcels added 3 cents to $3.40.
Gulf points barely budged. Gas on ANR SE was off a penny to $3.42, and Tennessee 500 L was down a cent at $3.43. Transco Zone 3 came in up a cent at $3.46, and the Henry Hub was quoted at $3.44, also up a cent. Texas Eastern E LA was seen at $3.40, unchanged, and Columbia Mainline was also unchanged at $3.41.
California points weakened. Malin was quoted at an average $3.51, a nickel lower, and deliveries to PG&E Citygates were down a cent at $3.72. At the SoCal Citygates Friday deliveries were quoted at $3.65, down about two cents, but at the SoCal Border next-day gas dropped 8 cents to $3.54. Deliveries on El Paso S Mainline tumbled 13 cents to $3.63.
Futures traders were caught off guard by the EIA storage figure. “The number spooked a few people, and it’s supposed to be very cold here starting next week,” said a New York floor trader. “I think [Friday] we’ll have a short-covering rally and go out somewhere around $3.50 to $3.55.
“The next level to the upside is $3.69 to $3.70, which is kind of far away so I don’t know if we will get there. I think you will see some selling in front of there.”
Estimates of the release of inventory data by EIA showed a relatively wide range. A Reuters survey of 23 analysts and traders revealed an average 136 Bcf withdrawal for the week ended Jan. 11. The range of the survey was 121 Bcf to 156 Bcf. Ritterbusch and Associates forecast a decline of 140 Bcf, and Bentek Energy predicted a withdrawal of 146 Bcf. Last year, a thin 89 Bcf was withdrawn, and the five-year average stands at 144 Bcf.
There was a bit of unease in the analytical ranks ahead of the EIA report. “[S]omething doesn’t feel quite right this week,” said John Sodergreen, editor of Energy Metro Desk (EMD). “Everything seems to point to a higher pull than expected. The EMD Consensus came in at -139 Bcf, which is a slightly higher injection than the survey average of -137 Bcf.
“EMD ‘All Star’ Forecast (which looks at the average forecast of our top seven analysts over the past three years) is also high at -141 Bcf. A number of analysts also suggested a smaller-than-expected pull this week. Certainly, there is a bit of confusion out there right now. The whopping 201 Bcf report last week was well over 10 Bcf higher than our consensus, which was higher than most other surveys. This of course adds to the confusion.”
The week ending Jan. 11 was the first week that the EIA incorporated separate columns for the Producing Region’s salt cavern and non-salt cavern storage facilities. Non-salt cavern facilities are more often used for seasonal storage, while salt cavern facilities lend themselves to frequent cycling. The region’s salt cavern storage figure dropped by 8 Bcf from the previous week to 275 Bcf, while the non-salt cavern figure declined by 33 Bcf to 837 Bcf. The EIA first split the Producing Region’s facility types in storage report footnotes in March 2012 in an effort to give analysts and industry more comprehensive information on the relationship between natural gas inventory changes and types of storage facilities (see Daily GPI, March 26, 2012).
There was little change in the six- to 10-day outlook overnight. MDA Weather Services said, “Widespread much below- to strong below-normal conditions are still projected from the Midwest to Northeast during the first few days of this time frame.”
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