Physical natural gas for next-day delivery was largely mixed in Monday's trading, but at the end of the day overall prices were a dime higher at $2.53 as gains in the Northeast, Mid-Atlantic, Midwest, and Rockies easily outpaced lower quotes in the Gulf region.
Weather forecasters acknowledged a mild start to the week, but expected a cool incursion by mid to late week. Futures prices softened, and traders see a broad range for the week extending another 30 cents lower. At the close April had given up 1.1 cents to $2.716 and May had fallen 1.7 cents to $2.739. Crude oil reached its lowest point in six years with April settling at $43.88/bbl. down 96 cents.
Robust power prices in the Northeast help lift next-day quotes at New England market points. Intercontinental Exchange reported peak Tuesday power at the ISO New England's Massachusetts Hub rose $8.02 to $53.46/MWh, although next-day temperature forecasts called for moderate conditions.
Gas at the Algonquin Citygates for Tuesday delivery rose $2.08 to $5.57 and deliveries to Iroquois Waddington rose 17 cents to $3.20. Deliveries to Tennessee Zone 6 200 L gained $1.54 to $5.11.
Gas bound for New York City on Transco Zone 6 added 13 cents to $2.65 and packages on Tetco M-3 rose 33 cents to $2.01.
In the Marcellus, next-day gas enjoyed gains of more than a dime. On Millennium next-day parcels were seen at $1.48, up 17 cents and deliveries on Transco Leidy were quoted 16 cents higher at $1.41. Gas on Tennessee Zone 4 Marcellus changed hands 3 cents higher and on Dominion South Tuesday parcels added 33 cents to $1.78.
A cooldown looked to be in store for eastern points by mid week. AccuWeather.com forecast that Boston's Monday high of 44 degrees would reach 48 Tuesday but drop to 29 Wednesday. The normal high in Boston is 46. Monday's high of 51 in New York City was expected to rise to 54 Tuesday before sliding to 37 Wednesday. The normal mid March high is 50. Philadelphia's Monday high of 57 was anticipated to rise to 62 Tuesday and drop to 44 Wednesday, 9 degrees below normal.
AccuWeather.com meteorologists are thinking that "After a spike in temperature on Monday, much colder air will sweep across the Midwest and Northeast through the middle of the week. In the wake of a cold front, temperatures will be slashed by 15 to 25 degrees Fahrenheit during Tuesday and Wednesday, following above average to record warmth from Monday.
"The first wave of colder air will sweep from Minneapolis and Chicago to New York City and Washington, D.C. However, the chill will not be limited to a day or two from the Upper Midwest to the Northeast. Multiple shots of cold air will drop in from central and eastern Canada through the start of astronomical spring and on into April. While there could be a day or two of warmth ahead of any cold front, the weather pattern is not favoring any sustained warmth across the East into April." said AccuWeather.com meteorologist Mark Paquette,
Gulf quotes were generally lower. Deliveries on ANR SE were flat at $2.63, but gas at the Henry Hub fell 3 cents to $2.66. Gas on Columbia Gulf Mainline retreated a penny to $2.59, and gas at Katy fell 6 cents to $2.56.
In spite to the cold forecast for later in the week, observers don't see much of a basis impact. "Basis prices across the country are not likely to find much support from weather this week as most forecasts indicate mild conditions ahead," said industry consultant Genscape. "The exception is in New England where a brief shot of sub-seasonal cold is expected to move into the market by Tuesday evening through Wednesday afternoon.
"Otherwise, most markets east of the Mississippi will experience normal to slightly warmer-than-normal conditions. Slightly above-normal warmth is blanketing western demand markets. This past weekend temperatures throughout California and the Desert Southwest were high enough to initiate cooling loads. Temperatures are expected to ease with the start of this week.
Risk managers are looking at longer-term forecasts calling for demand-busting usage and are keeping a sharp eye out should prices breach select parameters. Mike DeVooght, president of DEVO Capital Management, pointed out that last week's storage report, at first glance supportive, "was not bullish enough to offset a warmer than normal weather forecast for much of the country over the next couple weeks. On a trade basis, we will hold current positions. If the spot market drops below $2.60, we will liquidate positions," he said in a weekly note to clients.
Currently, DeVooght advises trading accounts and end-users to hold a long April $4.20 call option against the sale of an April $3.90 put. Producers should stand aside, he said.
Forecasters Monday morning saw somewhat cooler temperatures but also lower heating requirements. WSI Corp. in its morning outlook said "[Monday's] six- to 10-day period forecast is cooler than previous forecasts across much of the nation, except the Northeast due to the period shift. However, daily temps are up a few across a good portion of the central and eastern U.S. As a result, period [gas-weighted heating degree days] are down 2.7 to near 89.5 for the CONUS.
"Forecast confidence is about average today as medium-range models are in slightly better agreement with the timing and progression of the pattern. However, the lack of consistency and a changeable stretch of weather hampers confidence levels. The idea that the EPO [Eastern Pacific Oscillation], AO [Arctic Oscillation] and NAO [North Atlantic Oscillation] may be in negative phases support a slight risk to the colder side across the eastern two-thirds of the nation during the start of the period. On the other hand, the East has a slight upside risk during the end of the period."
In the short term, however, PJM gas buyers for power generation, may be able to take advantage of ample wind generation as a front sweeps across the power pool. "High pressure and a west-southwest breeze will lead to partly sunny skies and spring-like warmth across the power pool [Monday]. High temps may warm well into the 50s, 60s and even 70s, [and] a sharp cold front is expected slide southward late tonight into Tuesday morning with a slight chance of a shower," WSI said.
"A brisk northwest wind behind the front will usher colder high pressure into the power pool during Tuesday into Wednesday. High pressure is expected to slide away from the region during Thursday. This may allow a complex frontal system to at least clip southern and eastern areas with a chance of rain, even some wet snow late Thursday into Friday. A west-southwest to northwest wind associated with the cold front will support elevated wind generation during the next couple of days. Output may range 4-5 GW. Wind generation should subside and become light during Wednesday into Thursday, but some improvement is possible by the end of the week."