Sparked by natural gas futures gains through Thursday on the New York Mercantile Exchange, Northeast and Louisiana points mostly posted single-digit gains Friday, while low gas demand and moderate temperatures allowed most of the market to shed anywhere from a couple of pennies to 83 cents, with the largest drops coming from the Midcontinent and the West.
Market watchers on Friday attributed the recent strength at Northeast cash points to the surprising run by the bulls on Nymex. Not satisfied with the 25-cent rally in April natural gas futures on Wednesday, bulls went back for more on Thursday, even as the Energy Information Administration (EIA) reported that 17 Bcf was injected into underground storage for the week ended March 16, which is three weeks before the traditional end of the withdrawal season. On Thursday, a round of short-covering helped push the prompt month another 16 cents higher to $7.32, but the contract gave back 5.1 cents on Friday to finish the week.
“Things were a little stronger Friday on the back of the sustained Nymex rally, which people are having a hard time finding justification for,” said a Northeast trader. “Any price movement in cash gas in the Northeast has all been on the heels of Nymex, highlighting how futures trickles down through into the cash markets. That is really what has been driving fixed price mostly. Other than that, things are relatively seasonal. The weather pattern slipped to slightly below normal, like 2-3 degrees around New England, which sparked a little bit of demand for retail loads. Day-over-day, there was a little bit of strength, but certainly nothing that the market couldn’t bear.
“The activity kind of propped things up by a couple of pennies. Tight ranges with nothing really getting out of control,” he added. “Power prices were not that strong, so generation wasn’t out there buying aggressively. It really was more seasonal cash basis trading like 55-60 cents. Fixed price at Algonquin was around $7.70 and Tennessee Zone 6 was near $7.65.”
More spring-like warmth was expected to move into a large swath of the country including the Northeast sometime during the last week of March, according to the National Weather Service (NWS), The government forecasting agency’s six- to 10-day forecast covering March 29 to April 2 is calling for above-normal temperatures east of a diagonal line from central New Mexico to the northern tip of Michigan. California and the Pacific Northwest, across to central North Dakota are expected to experience below-normal readings during that timeframe.
While the Northeast flashed some strength, weakness prevailed in the West on Friday with Kern Delivery (down 83 cents) and SoCal Border Average (down 81 cents) posting some of the largest declines. “I would say there was a lot of weakness in the West Friday,” said a West Coast utility trader. “It’s all relative, especially when you compare prices at the Henry Hub to prices at PG&E Citygate, SoCal, Opal and San Juan. It is far weaker in the West. Demand is low out here. There is a lot of gas right now searching for a home due to some pipeline and injection maintenance. Add to that low demand levels, and you can see how everything is coming at once.”
Like much of the industry, the West Coast utility trader wondered why a storage build with two more inventory reports still to go in the traditional withdrawal season would lead to a second-day rally on Nymex. “We got a pretty good build and Nymex responds with higher prices,” he said. “That did not make a lot of sense to a number of people on Thursday.”
Commenting on the potential for a return to withdrawals when the EIA releases its report for the week ended March 23 on Thursday, the trader said that while he doesn’t really monitor the report that closely anymore, he had a “can’t miss” prediction. “I don’t know whether we will see another national build in the next report, but I would bet that the West will still be injecting,” he joked.
Bringing to a close a turbulent week of ups and downs, Rockies prices mostly dropped Friday, with El Paso non-Bondad sliding 71 cents to $5.19 and Opal declining by 45 cents to $3.97.
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