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NatGas Physical, Futures In Tailspin; January Sheds 32 Cents; East Sees $1.00 Quotes

Both physical and futures markets fell hard and fell often in Monday's trading. Declines were most pronounced in the cash market where not one market location registered a gain, and all locations were deep into the loss column by double digits. Temperature forecasts in major markets called for seasonal if not increasing readings out to Christmas and the average decline was 55 cents.

Futures couldn't quite match the free-falling physical quotes, but did manage to post solid losses of its own. At the close January had dropped 32.0 cents to $3.144 and February swooned 31.8 cents to $3.180. February crude oil resumed its losing ways dropping $1.87 to $55.26/bbl.

One look at the temperature forecasts in the Great Lakes and Midwest was enough to send those markets south. Forecaster Wunderground.com predicted the high Monday in Chicago of 38 would rise to 45 Tuesday before sliding to 39 Wednesday. The seasonal high in Chicago is 33. Milwaukee's Monday high of 37 was expected to reach 45 Tuesday also and fall to 38 by Wednesday. The normal late December high in Milwaukee is 31.

Declines at Midwest and Great Lakes points were about in line with the overall national tumble. Next-day gas on Alliance fell 49 cents to $3.01 and gas at the Chicago Citygates skidded 47 cents to $3.00 also. At the ANR Joliet Hub gas for Tuesday was quoted at $3.00, lower by 52 cents and parcels on Consumers dropped 50 cents to $3.08. Gas on Michcon changed hands at $3.08, down 51 cents.

Eastern points took the greatest fall. Next-day gas at the Algonquin Citygates fell $2.47 to $3.14 while parcels on Iroquois Waddington dropped 65 cents to $3.17 and gas on Tennessee Zone 6 200 L shed $1.95 to $3.25.

In the Mid-Atlantic losses approached $1. Gas headed for New York City on Transco Zone 6 fell 57 cents to $2.97 and deliveries on Tetco M-3 shed 89 cents to $1.41.

Gas at Marcellus points posted lows not seen in over a year. Deliveries to Transco Leidy traded as low as 99 cents before finishing at $1.29, down 53 cents. On Tennessee Zone 4 Marcellus Tuesday packages also traded down to $1.00 before ending the day at $1.32, down 47 cents. The $1 quotes on Zone 4 Marcellus are the lowest since September of last year.

Gas on Millennium was seen 63 cents lower at $1.38 and gas on Dominion South fell 82 cents to $1.23.

Nationally several systems were seen in play leading to stormy wintry-like conditions, but none with sufficient punch to deliver significant cold. "An area of low pressure will shift across the central third of the country on Monday, while a coastal system will develop over the southern Mid-Atlantic," reported Wunderground meteorologist, Kari Strenfel.

"A low pressure system will move eastward over the northern Plains and the Midwest on Monday. This system will usher widespread precipitation across the Plains, the Mississippi Valley, the Tennessee Valley and the upper Midwest. Snow showers will be mostly confined to the northern Plains, while a mixture of rain and snow will affect the central high Plains and the upper Midwest.” Light rain will spread to the south.

In the West, the only notable weather will be moderate to heavy snow showers across the central and northern Rockies with some snow accumulations possibly exceeding one foot across favorable mountain slopes. There will be some rain and thunderstorms in the East, Mid-Atlantic and Gulf Coast.

Producing locations were not immune to the price drubbing. Next-day gas on NGPL TX OK dropped 44 cents to $2.83, and gas at Carthage also was lower by 45 cents to $2.85. Gas at Katy changed hands 37 cents lower to $2.96 and deliveries on Tennessee Zone 0 North were seen 50 cents lower at $2.78. Gas on Transco Zone 1 was lower by 56 cents to $2.82.

Futures prices were lower right out of the gate as weekend temperature forecasts moderated. In its morning outlook, Commodity Weather Group said, "The three biggest issues this morning are the (1) weaker cold air arrival, (2) the bigger divergence in the modeling especially by the 11-15 day, and (3) then the lack of consistency/consensus in holding the pattern together at day 15 itself.

"Just like last week, the models continued over the weekend to struggle, pushing the cold forward in time. While the six-10 day looks colder than it did back on Friday's forecast, it is not nearly as cold as what simple progression would have offered. The 11-15 day guidance is very fractured this morning, with a much warmer East on the European guidance, a much colder everywhere look on the Canadian, and then a weaker East Cold appearance on the American ensembles. We favored a blend of our prior outlook and the American ensemble, which is in the middle ground today among the guidance. The lack of pattern stability at day 15 also reduces confidence with warmer risks to the 16-30 day," said Matt Rogers, president of the firm.

Risk managers are holding on to existing positions. "[Last] week represented the first time in 2014 that storage levels were higher than last year's levels at this time," said Mike DeVooght, president of DEVO Capital. "Gas broke sharply to close the week and until the U.S. experiences significantly cooler temperature, the negative fundamentals will continue to weigh down the natural gas market."

DeVooght suggests that trading accounts hold long January $4.20 calls and Short January $3.90 puts, and hold long February $4.20 calls and short February $3.90 puts. End-users should hold long January $4.20 calls and Short January $3.90 puts, and hold long February $4.20 calls and short February $3.90 puts.

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