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Surging Northeast, Mid-Atlantic Lift Natural Gas Market; Futures Inch Higher

Natural gas for delivery Tuesday advanced at almost every market point as a strong wintry weather system pounded New England and temperatures across the Mid-Atlantic, Ohio Valley and Midwest were forecast to be below normal.

Multi-dollar gains were seen in the Northeast, and market points in the Midcontinent and Rockies added 10 cents to 20 cents while the Gulf Coast and Midwest were up about a nickel. Overall, the market rose 36 cents to $2.95.

March futures opened on a firm note but gradually lost ground throughout the session. At the close, March had inched higher by 1.8 cents to $2.597 but not until making a new low for the move at $2.571. April rose 2.3 cents to $2.625. March crude oil added $1.17 to $52.86/bbl.

Across market centers ranging from Cambridge, MA, to Chicago, cold wintry weather remained the norm. AccuWeather.com forecast that Boston would receive another 12 inches of snow on top of the two feet it has already received. As of the first nine days of February Boston has already received 62% of its normal precipitation, according to AccuWeather.com figures.

The high Monday in Boston of 23 was expected to give way to 29 Tuesday before falling to 24 Wednesday, 14 degrees below normal. In Pittsburgh, Monday's high of 35 was seen retreating to 34 Tuesday rising to 42 Wednesday, 4 degrees above normal. Chicago's maximum Monday of 28 was predicted to fall to 25 Tuesday before climbing back to 32 Wednesday, still 2 degrees below normal.

Gas for delivery to the Algonquin Citygates Tuesday rose a stout $3.71 to $12.36, and gas on Iroquois Waddington was seen $1.02 higher at $5.43. Deliveries to Tennessee Zone 6 200 L jumped $4.19 to $12.56.

Gas headed to New York City on Transco Zone 6 changed hands $4.05 higher at $7.52, and deliveries to Tetco M-3 rose 61 cents to $3.06.

Marcellus points were more than a dime higher. Gas on Millennium was quoted 19 cents higher at $1.58, and parcels at Transco Leidy rose 13 cents to $1.40. Gas on Tennessee Zone 4 Marcellus added 13 cents to $1.34, and on Dominion South next-day packages came in at $2.29, up 30 cents.

Next-day power prices also provided a firm footing for incremental gas purchases. Intercontinental Exchange reported that Tuesday peak power at the ISO New England's Massachusetts Hub jumped $18.12 to $96.01/MWh and next-day peak power at the PJM West terminal rose $2.24 to $35.71/MWh.

"Blasts of arctic air will follow moderate cold and a couple of Alberta Clipper storms swinging through the Boston area this week," said Alex Sosnowski, AccuWeather.com meteorologist. "Daytime highs will be in the 20s F during the middle part of the week, [and] the average high for the middle of February is in the upper-30s F. Dry weather is in store for the region Tuesday through Wednesday, prior to the arrival of an Alberta Clipper storm with some snow later on Thursday.

"In the wake of the Thursday clipper, very cold air will move in Thursday night and Friday on gusty winds. [Wind chill] temperatures will dip well below zero. As a reinforcing blast of cold air moves in, another Alberta Clipper storm could bring a period of accumulating snow or just flurries later on Saturday. While the north-south orientation of the storm track this weekend is uncertain this far out, it is also possible this clipper storm will strengthen upon reaching the coast.

Midwest and Rockies points posted solid gains. On Alliance Tuesday deliveries were up a penny at $2.67, and at the Chicago Citygates Tuesday gas was quoted at $2.63, up 4 cents. Gas on Consumers rose 4 cents to $2.70, and Michcon deliveries added a couple of pennies to $2.72.

At the Cheyenne Hub Tuesday parcels added 17 cents to $2.32, and gas on CIG Mainline rose 14 cents to $2.24. At Opal gas changed hands at $2.31, up 20 cents, and on El Paso non-Bondad Tuesday gas jumped 20 cents to $2.33.

Futures traders noted uneventful trading with a $2.50 to $2.75 trading range intact.

In its Monday morning six- to 10-day outlook, Commodity Weather Group sees an expanded area of below and  much below normal temperatures encompassing the eastern half of the country.

"The incoming colder pattern rebound maintained its trajectory over the weekend but strengthened as it moved closer in time on all dynamic model guidance," the forecaster said. "While last weekend came in warmer than expected in some spots and the West is seeing general warmer changes in especially the 1-10 day range (80s in Burbank this week), the colder changes for the Midwest, South and East are the prime contributors to today's bigger demand gain compared to last Friday's forecast.

"Expansion into the Midwest and South at times were the biggest additive components, especially in the six-15 day range. The big picture continues to hold Alaska ridging in place with the European and Canadian ensembles especially solid on the view. The American guidance is starting to get more variable at the end of the 11-15 day, which allows for some moderation, especially in the South, but the latest CFS guidance keeps the cold holding into March too," the company said.

In a report, industry consultant Genscape noted a hefty increase in production in just the past 30 days. "Lower 48 dry gas production in the past 30-days and winter-to-date is running more than 5 Bcf/d greater than last year's same time periods. Spring Rock's estimate for Lower 48 dry gas production is at 72.05 Bcf/d for [Monday]. During the past 30 days, production has averaged 71.53 Bcf/d. During the same 30-day period last year production averaged 65.9 Bcf/d. This winter-to-date production is averaging 71.22 Bcf/d; last winter-to-date production averaged 66.09 Bcf/d," Genscape said.

Analysts see the market eventually being able to absorb the increase in production and recommend a long position in more deferred contracts. Teri Viswanath, director of natural gas commodity strategy for BNP Paribas, said for the moment that too much production is chasing too little demand, but "the demand-side balancing we envision should not only establish a floor for prices but will likely enable significant price recovery by year-end," she said in a report Friday.

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