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Widespread Shift to Colder Forecasts Lifts Prices
Following rather moderate Thanksgiving weekend weather in most regions, traders returned to their offices Monday to face much more winter-befitting forecasts going into December. That, along with a modest futures advance on the preceding Wednesday and the return of industrial load from holiday hiatus, propelled a solid majority of the cash market to substantial gains.
A flat Westcoast Station 2 joined several New England locations that fell from a couple of pennies to nearly a quarter in being left out of overall gains ranging from 2 cents or so to about half a dollar. Most of the upticks were well into double digits.
December futures went off the board with a whimper — certainly not a bang — as expiration-day trading pushed them 17.8 cents lower to a $3.364 settlement (see related story). The gas contract was the only weak link in Nymex’s energy futures chain as other components firmed as a result of better news about Europe’s economic crisis and strong early results in the U.S. holiday shopping period.
The screen signaled falling first-of-month December indexes by closing out 16 cents below the November expiration.
With only two days to go until its annual closeout (see related story), the 2011 Atlantic hurricane season remained devoid of any significant activity Monday.
The elimination of OFO actions against long imbalances by Southern and Northwest gave a little additional boost to prices in their respective market areas.
Somewhat curiously, it was much of the Northeast, along with Florida, the desert Southwest and the lower half of the West Coast that could expect the mildest conditions Tuesday. Subfreezing lows were predicted in most other areas outside the South, and The Weather Channel said there was a good possibility of snowfall reaching the South’s upper levels.
A Midwest marketer said she was “still holding off a little” on calling it winter yet after her area had a very mild Thanksgiving. However, overnight lows have started dipping into the 20s since then, she said, so the utility is selling a fair amount of heating load gas to customers.
With November temperatures often 10% warmer than usual, the company ran up quite a positive imbalance during the month, the buyer said. She is trying to decide what to do with the excess supply, noting that despite Monday’s price rises it’s a tough market to sell into currently. The buyer was kind of surprised to see Midcontinent averages dip well under $3 Wednesday, but she said they were back up as much a half dollar or so Monday.
The utility finished December baseload business last week, she said, buying Northern Natural-demarc gas at index minus half a cent.
A marketer in the Upper Midwest said there was a little snow in the local forecast but it was fairly inconsequential for this time of year. Her company was glad to have softening futures result in lower prices for clients, she said, as it bought December gas at last-day settlement basis of plus 24 cents for Consumers Energy and plus 28 cents for MichCon, which will yield fixed-price equivalents in the low to mid $3.60s.
A Midcontinent producer was another trader who had December deals “pretty well wrapped up” before the holiday break, selling almost everything based on monthly indexes. He saw a possibility of the futures dive pushing most Midcontinent pipes below $3 again but said the eight- to 14-day forecast for his region and more short-term outlooks in the West looked “decent” as far as demand-boosting low temperatures.
IntercontinentalExchange (ICE) confirmed a marketer’s report that Chicago citygate baseload prices for December had slipped a little less than a nickel in diminished Thanksgiving eve trading on its platform Wednesday (see Daily GPI, Nov. 28).
ICE said futures strength helped arrest the slide of bidweek numbers and even caused a few rallies in slowing December business Monday. For instance, it said El Paso-Permian was back up to a $3.32 average after falling to a little less than $3.28 Wednesday, while the Southern California border saw almost no change in staying around $3.615 Monday.
The Baker Hughes Rotary Rig Count chalked up its second six-unit drop in a row in reporting the number of active gas-directed drilling rigs falling by another six to 865 during the week ending Nov. 25. Two rigs were added in the Gulf of Mexico, Baker Hughes said, but eight were idled onshore. Its latest tally is down 7% from a month ago and down 9% from the year-earlier level.
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