Natural Gas Intelligence
Northeast Strength Fails to Offset East, Gulf Weakness; Futures Flub

Friday, November 30, 2012

Prices declined on average by 9 cents Thursday as Northeast traders had to deal with constraints and cold weather, but there were milder conditions in the East and Gulf Coast region. The Energy Information Administration (EIA) reported that inventories increased 4 Bcf, but the market was expecting a modest draw, and futures prices took a double-digit beating. At the close January had fallen 15.3 cents to $3.648 and February was down 14.8 cents to $3.668. January crude oil added $1.58 to $88.07/bbl.

"[Friday] is the big issue with us. There is cold weather along with pipeline cuts on Algonquin and Tennessee. There is just too much gas trying to go somewhere," said a Northeast marketer. He added that based on forecast cold weather and pipeline issues "Gas for Friday delivery on Tennessee Zone 6 200 L traded on average at $9.73, and I would expect it to trade between $9.50 to $10 and about 30 cents higher on AGT [Algonquin Gas Transmission]."

Algonquin posted notices of capacity constraints upstream of its Cromwell, Stony Point, and Oxford compressor stations as well as at the Tennessee Gas Pipeline interconnect at Mendon.

Temperatures in the Northeast were expected to plunge Friday, but conditions farther south were anticipated to be slightly milder. forecast that Thursday's high in Boston of 44 would drop to 35 on Friday, well below its seasonal norm of 47. In New York City, Thursday's high of 45 was predicted to ease slightly to 44, five degrees below its seasonal norm.

Estimates of Thursday's inventory figures varied widely, and volatility was high once the number hit the market. "This week's EIA report should be a big surprise," said John Sodergreen, editor of Energy Metro Desk. "The range of forecasts this week are all over the lot; second, the spread between the three categories we track is a whopping 5 Bcf -- all we need is a 3-point diff[erence] to call a surprise EIA report of 5 Bcf high/low of the report tally.

Last year, 2 Bcf was injected, and the five-year average is for a draw of 18 Bcf. A Reuters survey of 30 traders and analysts revealed an average 12 Bcf pull with a range from a decline of 28 Bcf to build of 4 Bcf. ICAP Energy calculated a 7 Bcf drop, and Bentek Energy was looking for a 2 Bcf decline. Citi Futures Perspective analyst Tim Evans predicted a 4 Bcf increase.

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