Paced by triple-digit advances at Midwest and Northeast citygates and on Dominion in Appalachia and several Midcontinent pipes, nearly the entire cash market put in a strong weekend price performance in Friday’s super-volatile trading. Flat San Juan Basin numbers missed out on the price party, and other western points tended to see most of the smaller gains of less than 30 cents.
$10-plus peaks were common in the Northeast, while Chicago and Dawn in the Midwest topped out at $10 and $13 respectively. Multi-dollar trading ranges were in vogue in both northern market areas.
The general bullishness had a solid foundation following yet another storage withdrawal report in excess of 200 Bcf on Thursday, which had come too late to have much price-boosting impact beyond that day’s late upticks. Further support came from early screen strength that eventually built to a daily settlement up nearly 45 cents. The heating oil and crude oil contracts also realized large gains. In addition to continuing concerns about war with Iraq, an explosion and fire at ExxonMobil’s Port Mobil terminal on Staten Island, NY helped push up April crude futures nearly a dollar to $35.58/bbl. The terminal handles gasoline and other petroleum products.
But it was weather fundamentals that got most of the blame or credit, depending on one’s point of view, for most of Friday’s spikes. An arctic front prompted winter storm watches throughout much of the Midwest. And though the Northeast could expect one more day of above-freezing weather Saturday, it remained under heavy snow cover while awaiting a storm system moving up from the Gulf Coast that threatened flooding misery over the weekend and then renewed ice and snow problems starting Sunday and lasting through the middle of this week.
Even the West, which has largely avoided for most of this winter the ravaging weather experienced in the East, was due for a weekend taste in some parts. Snow and frigid temperatures in the Cascades and northern Intermountain West were predicted to reach the Colorado Rockies by Sunday. However, Friday’s markets in the West were milder than those elsewhere. San Juan-Blanco numbers were flat, while other western upticks tended to range from a little less than 20 cents to about 30 cents. Getting a boost from Midcontinent/Midwest demand, Permian Basin gas recorded the West’s top gain of nearly half a dollar.
A slew of OFOs and similar actions on eastern pipes (see Transportation Notes) only exacerbated the market demand picture by throwing transportation constraints into the mix.
“We’re still digging out from the snow,” commented a Northeast utility buyer. “Now we can expect a wet weekend, turning to snowy at the end. Prices kept getting stronger and stronger Friday, helped along by the screen spike. Then we had to deal with operational concerns, including a pipeline leak [see Transportation Notes], on Texas Eastern and other pipes to the Northeast. IT and other transport was getting constrained.” The Dominion storage situation is pretty weak, he continued, which is why prices there have been about as strong as Northeast citygates lately.
The buyer was especially concerned about the prospects for even colder weather starting Sunday, saying Monday may be critical for market-area supplies.
“Everything really went crazy, and it shocked a lot of people,” said a Midwest trader referring to big spikes all over the region. She reported seeing Dawn go as high as $13 on an online platform.
As if in echo, one excited Midcontinent trader exclaimed, “Oh man, oh man, prices going though the roof! Cash moved up a dollar while the screen moved only about 30 cents [during the morning], so I would say swing gas is definitely pushing the Nymex.”
A Florida utility buyer said he had no weekend purchases to report, citing temperatures in the low 80s. “We’ve got it pretty good for now,” he added, but wait until air conditioning load starts cranking up in a couple of months and Florida Gas Transmission starts posting constant Overage Alert Day notices again.
Analyst Kyle Cooper of Salomon Smith Barney said his initial expectation for this week’s storage report “looks for a draw to still be quite large and above 150, maybe even above 160 Bcf. This will compare against a draw of just 73 Bcf last year, a three-year average draw of 103 Bcf and a five-year average draw of 95 Bcf. Quite simply, the entire energy complex remains in a very bullish state and until some sort of at least neutral information enters the market, prices are likely to remain supported.
At least as of Friday, basis is much looking much stronger than usual for March, according to a Northeast utility buyer. He quoted Dominion South Point at plus $1.15, which equated to the mid $7.70s based on Friday’s screen close. Texas Eastern M-3 is even stronger at plus $1.60, he said.
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