Natural Gas Intelligence
Northeast Leads Broad Decline; Futures Trek Lower

Thursday, December 13, 2012

Cash natural gas fell 11 cents overall on average Wednesday as the screen continued weak and there was no hint that winter weather would be enough to make a significant dent in storage. Northeast points were particularly hard hit but the Midcontinent and East weakened as well. At the close of trading January futures had fallen3.0 cents to $3.382 and February had dropped 2.9 cents to $3.412. January crude oil added 98 cents to $86.77/bbl.

The forecast of a cold incursion bringing chilly air from North Dakota to North Texas in the next several days was small comfort to Midcontinent producers.

"That helped a little bit [with prices], but there is still a lot of supply. People are coming to me with their gas, so I don't know what is going on," an Oklahoma producer said. "All restrictions on OGT [Oklahoma Gas Transmission] have opened up, but NGPL may have some constraints into Chicago. The market seems pretty oversupplied right now. I think this is a good place to put on some short hedges for a producer." Thursday's Energy Information Administration (EIA) expected report of a thin withdrawal "may have spooked the market and that is why Nymex went down," he added.

hursday's EIA inventory report is anticipated to show a thin withdrawal putting still more market pressure to the sell side. Last year a robust 79 Bcf was pulled from storage and the five-year average stands at 113 Bcf. A Reuters poll of 26 traders and analysts showed an average 4 Bcf withdrawal with a range of a 15 Bcf pull to a 7 Bcf build. Citi Futures Perspective is looking for a draw of just 7 Bcf and Bentek Energy's North American flow model predicts a decline of 3 Bcf.

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