Physical natural gas for weekend and Monday delivery fell hard in Friday's trading as increased supplies, mild temperatures and load-killing rain over the weekend in eastern markets were expected to give way to seasonal readings by Monday.
Prices up and down the East Coast took hefty double-digit hits, but market losses of a nickel to a dime were common. Only a handful of points managed gains, and they were only for a penny or two. Overall, the market shed 17 cents. Futures posted an uninspired pre-weekend gain with the November contract gaining 1.4 cents to $3.859 and December adding 1.2 cents to $3.949. November crude oil fell hard, but at the end of the day managed a gain of 5 cents to $85.82/bbl.
Northeast points suffered the heaviest, bruising with losses of a half-dollar or more. Even though cool temperatures and rain were forecast over the weekend along the Atlantic Seaboard, temperatures were expected to return to seasonal conditions by Monday.
According to AccuWeather.com meteorologists, "after a cool weekend around Philadelphia, much of next week will be warm for mid-October, but a potentially very disruptive storm will come calling at midweek. Temperatures during the middle of October average from a low in the upper 40s F to a high in the middle 60s around Philadelphia, [but] during much of next week, highs will be at or above these levels and will be well into the 70s for a couple of days.
"However, a storm forecast to gather strength over the central states will swing eastward during the middle of the week, while a southerly flow associated with the storm will help push warmth into the region; winds could begin to affect the region on Tuesday."
AccuWeather.com reported that Friday's high in Boston of 63 would give way to rain and only 54 on Saturday before reaching 61 on Monday. The normal high in Boston this time of year is 63. New York City's Friday high of 64 was seen turning into a wet and soggy Saturday with a high of 59 before making it to 66 Monday. The normal high in New York is 65. In Philadelphia the high on Friday of 63 was forecast to dip to 60 Saturday and then rise to 70 Monday. The normal mid-October high in Philadelphia is 68.
Additional supplies are on their way to New England. According to industry consultant Genscape, Tennessee Gas Pipeline reported "that maintenance on Station 261 in western Massachusetts has completed, [and] flows into New England have reached 0.85 Bcf/d, up from an average 0.7 Bcf/d for the week previous. Also [Thursday] Algonquin completed a one-day maintenance at the Chaplin compressor station. This followed a 20-day maintenance event between the Cromwell and Burrillville stations, which ended on Wednesday.
"Imports into New England on Algonquin at the Southeast compressor station have jumped to 1.26 Bcf/d, up from an average of 1.04 Bcf/d from the week before. This increase in imports is meeting rising demand in New England, projected at 2 Bcf/d for today, up from an average 1.75 Bcf/d for the previous week. With the maintenance season coming to an end, imports to the region should just be limited by their typical constraints," the firm said.
Power loads over the weekend were expected to be nominal from New England into the Midwest. ISO New England forecast that peak power Friday of 14,700 MW would ease to 14,400 MW Saturday before inching up to 14,440 MW Sunday. The New York ISO predicted peak loads Friday of 18,271 MW would drop to 17,132 MW Saturday and then ease further to 16,914 MW Sunday.
Across the broad PJM footprint, Friday peak load of 30,197 MW was seen dropping to 27,788 MW Saturday before reaching 28,227 MW Sunday.
Weekend and Monday deliveries to the Algonquin Citygates shed 66 cents to $1.69, and deliveries to Iroquois Waddington fell 61 cents to $2.47, and gas on Tennessee Zone 6 200 L changed hands 59 cents lower to $2.14.
A number of points in the Mid-Atlantic and Marcellus came close to scrubbing new lows. Deliveries to Transco Leidy traded as low as $1.15 before finishing at $1.43, down 38 cents, and packages on Tennessee Zone 4 Marcellus skidded to $1.30 before ending the day at $1.40, down 34 cents.
Dominion South and Millennium were in a similar pickle with Millennium down to $1.35 before finishing at an average of $1.48, down 33 cents, and Dominion South probing $1.34 and closing at $1.41, down 38 cents.
In the Mid-Atlantic, packages into New York City on Transco Zone 6 were down to $1.30 before ending the day to average $1.37, 46 cents lower. Gas on Tetco M-3 changed hands as low as $1.30, also before reaching an average $1.42, 37 cents lower.
Top traders for the longer term favor higher prices, but in the near term they advise caution as weather forecasts continue to be moderate.
"Although this market saw an initial upward response of about 5-6 cents to a slightly supportive EIA storage report [Thursday], the inability to hold gains suggests some further downside price risk to the $3.79 summer lows," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday. "The 105 Bcf injection was only 2-3 Bcf less than average Street expectations but furthered our projected trend for about a 1% per week reduction in the deficit against five-year average levels. The current shortfall is about 10.5%, and we expect more contraction to about 6% in about a month.
"Meanwhile, short-term temperature trends remain skewed bearish with above-normal temps expected across the entire country during the next couple of weeks. Until these trends inevitably shift back toward the cool side, downside price risk will remain and we will advise caution in approaching the long side. Nonetheless, we still feel that the next major move of some 30-35 cents, or 8-9%, is much more apt to develop on the upside rather than the downside. Looking ahead to [Friday's] trade, we will expect some price consolidation that could set the stage for a price rally by Monday if weekend updates to the temperature views shift colder. We favor probing the long side at current levels for a trading turn but would maintain close stop protection below the 3.77 level on a close-only basis."
Market technicians are not convinced that lower prices are imminent.
"[We are] still stuck in neutral territory. But as we are closer to support, that is our focus," said Brian LaRose, a technical analyst at United ICAP after the market closed Thursday. "Ideally if this retreat is corrective, natgas should be able to carve out a bottom from the $3.793-3.787-3.771 vicinity. However, [we] still peg 3.712, the 200-week moving average, as critical support. [We] see no reason to entertain a resumption of the down trend unless this level can be broken."
WSI Corp. in its Friday morning six- to 10-day outlook shows above-normal temperatures across the western half of the U.S. with much above normal temperatures in New York and New England, but it said, "[Friday's] six-10 day period forecast is a bit cooler along the East Coast but warmer over the interior West and central U.S. due to the day shift. However, temps did run a bit cooler across the north-central U.S. and warmer across the southern and eastern U.S. late in the period.
"Confidence in the forecast is average at best today due to technical and timing model differences with the progression of the pattern. The risk is to the cooler side across the East and warmer over the interior West into the Plains based on the ensembles, which depict a positive PNA- [Pacific North America] like pattern."