Natural gas for delivery Wednesday at most market points rose in Tuesday's trading with an assist from the power markets, where next-day power loads across major transmission grids were forecast to be higher and next-day power prices responded accordingly.
Only a handful of natural gas prices nationally lost ground, and in the Northeast next-day gas posted hefty double-digit gains with market points throughout the area responding not only to higher power demand, but also mid-week temperature forecasts well above normal.
Market zones gained a nickel or more. Overall, the market gained 3 cents to average $3.49. Futures elected to head the opposite direction, possibly taking a cue from imploding petroleum markets. November fell 10.0 cents to $3.816 and December shed 10.4 cents to $3.900. November crude oil plunged $3.90 to $81.84/bbl.
Power grids in New York and the Mid-Atlantic forecast increases in next-day peak power requirements. The PJM Interconnection said Tuesday's peak load of 35,289 MW would increase to 35,819 MW Wednesday before easing to 32,845 MW Thursday. The New York ISO anticipated that Tuesday's peak load of 19,950 MW Tuesday would reach 20,553 MW Wednesday and drop to 20,190 MW Thursday.
Next-day peak power prices advanced as well. According to IntercontinentalExchange, Wednesday peak power at the New York ISO A terminal (western New York) rose $6.89 to $45.00/MWh and deliveries to the ISO New England's Massachusetts Hub jumped $8.41 to $53.61/MWh. At the PJM West terminal next-day peak power fell $4.58 to $46.34/MWh.
Wednesday temperatures at a number of population centers were forecast to fall but to levels well above seasonal norms. Forecaster Wunderground.com predicted Philadelphia's toasty 79 high Tuesday would ease to 76 and rain Wednesday and 70 by Thursday. The seasonal high in Philadelphia is 64. Washington, DC's predicted high of 80 on Tuesday was seen sliding to 74 Wednesday and 69 on Thursday. The normal mid-October high in Washington is 69. Richmond, VA's 81 high on Tuesday was expected to fall to 73 Wednesday and 72 Thursday. The normal high this time of year in Richmond is 71.
The National Weather Service in Washington, DC, said, "a cold front extending south from low pressure over the Midwest will move across the region late tonight into Wednesday. An upper-level low will persist over the eastern states through this weekend. An area of low pressure could impact the region early next week."
Gas at the Algonquin Citygates gained a hefty 68 cents to $3.49, and packages on Iroquois Waddington rose 3 cents to $3.97. On Tennessee Zone 6 200 L, Wednesday gas changed hands at $3.35, up 49 cents.
Farther south, advances weren't quite as strong. Gas bound for New York City on Transco Zone 6 added 10 cents to $2.13, and gas delivered to Tetco M-3 came in 11 cents higher at $2.10.
On Millennium, Wednesday packages were seen at $2.09, up 10 cents, and on Transco Leidy next-day gas was quoted at $2.03, up 8 cents. Gas on Dominion South added 8 cents to $2.05, and deliveries to Tennessee Zone 4 Marcellus fetched $2.01, up 8 cents.
Producing zones also held to the positive side of the trading ledger. On ANR SW, deliveries for Wednesday were seen at $3.70, up 3 cents, and at the NGPL Midcontinent Pool parcels gained 5 cents to $3.73. At Northern Natural Ventura, gas for Wednesday delivery added 8 cents to $3.88, and on OGT gas rose 6 cents to $3.66. On Panhandle Eastern Wednesday gas changed hands at $3.63, up 4 cents.
Futures traders saw the natural gas market tugged lower partially in response to cascading petroleum prices. "This market appeared to get swept up in the huge liquidation that covered the rest of the energy space," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Tuesday to clients. "But lack of bullish assistance from the short term weather forecasts also accommodated some selling as this market is still unable to piece together a meaningful price rally. The dynamic of storage deficit contraction is apt to remain intact with Thursday's EIA release. Although our expected 89 Bcf injection would narrow the deficit against five-year averages by 11 Bcf, this narrowing would be much slower than in previous weeks.
"Furthermore, we look for storage builds to be downsized seasonally and sequentially into next month when a supply peak is likely to be established in late November. Today's price action reinforced our opinion of a market likely to remain confined to price parameters of the past two and a half months. A test of the July lows of $3.79 would appear likely tomorrow given today's violation of the August-September lows. However, caution ahead of another EIA report could restrict selling below this level even if temperature updates shift warmer."
Market technicians versed in Elliott Wave and retracement see both the bulls and the bears needing further price action to validate their case. "So far, ideal support at $3.793-3.787-3.771 is holding. The question now, can the bulls breach resistance? To signal the bulls are gaining the upper hand, 4.105 must be exceeded on a closing basis," said Brian LaRose, a market analyst with United ICAP. "Until and unless this can be accomplished, we have no reason to entertain a larger degree recovery. Meanwhile, bears still need to crack $3.711 (200 Week MA) to restore the down trend," he said in closing comments Monday.
Tom Saal at INTL FC Stone in Miami in his work with Market Profile is looking for the market to test Monday's value area at $3.899 to $3.871 before moving on and "eventually" testing $4.163 to $4.085. He notes that the November contract "continues its horizontal price action, the longer the horizontal the greater the chance for reversal to the upside.
"A trading opportunity is to trade the March '15-April '15 spread, aka the 'widow maker.' Buying the spread is a bullish strategy. Spreads are leverage plays because margin requirements are significantly less than with outage futures contracts," he said in a Tuesday morning note to clients.