With the exception of a few "hot spots," physical natural gas for weekend and Monday delivery traded lower Friday.
Overall, the NGI National Spot Gas Average fell 7 cents to $2.65, but weekend weather forecasts along the Eastern Seaboard called for temperatures to run 10 or more degrees above normal, and eastern points averaged gains of a nickel or more, with some spots posting double-digit advances.
Futures were able to fend off further selling resulting from Thursday's outsized addition to inventories, and September rose 1.4 cents to $2.801 and October gained 1.7 cents to $2.837. September crude oil rose 27 cents to $42.50/bbl.
Weekend and Monday gas at metropolitan areas along the East Coast jumped as temperatures were forecast to be well above seasonal norms. Forecaster Wunderground.com said Boston's 85 high Friday was seen rising to 89 Saturday and 92 by Monday. The normal high in Boston in mid-August is 80. New York City's Friday high of 86 was predicted to reach 91 Saturday and 93 by Monday, 10 degrees above normal. Philadelphia's forecast high Friday of 86 was anticipated to reach 93 Saturday, and 95 by Monday. The normal high in Philadelphia is 83.
Gas at the Algonquin Citygate was up 76 cents to $3.08 and deliveries to Iroquois Waddington gained 3 cents to $3.11. Gas on Tennessee Zone 6 200 L jumped 79 cents to $3.02. Gas for weekend and Monday bound for New York City on Transco Zone 6 added 16 cents to $2.93.
Stout Monday on-peak power prices made incremental purchases of natural gas for power generation an easy decision. Intercontinental Exchange reported that on-peak Monday power at the New York ISO Zone A delivery point (western New York) rose $28.92 to $67.17/MWh. Power at the ISO New England's Massachusetts Hub added $28.45 to $60.50/MWh and on-peak power at the PJM West Hub rose a hefty $20.12 to $62.11/MWh.
Other market centers saw declines of a dime or more. Gas at the Chicago Citygate shed 11 cents to $2.90, and deliveries to the Henry Hub were off 9 cents to $2.83. Gas at Opal dropped a dime to $2.72, and gas at the SoCal Citygates was also a dime lower at $3.11.
Industry consultant Genscape reports that the beleaguered Alliance Pipeline has restored cross-border flows after being shut down earlier this week. "While upstream prices reacted predictably to the event, the lack of downstream price response provides insight to the ample supply situation the Midwest finds itself in amid the reshuffling of North American gas flows. Nominated flows at the Alliance U.S. Mainline point at the Canadian-U.S. border for today are at 1,667 MMcf/d after having been at zero since Aug. 8.
"The pipe was shut down due to excess levels of hydrogen sulfide, which required the pipe to be purged by flaring, then repacked. Flows just prior to the shutdown were running around 1,800-1,900 MMcf/d on the roughly 2,000 MMcf/d capacity system," Genscape said (see Daily GPI, Aug. 13, Aug. 7).
Futures got some supportive help from overnight near term weather forecasts which turned modestly warmer. "While no major changes are noted this morning, the general themes for [Friday] include slightly warmer to hotter East Coast conditions in the six-15 day range, some slightly cooler Midwest weather early in the 11-15 day, slightly cooler West Coast and about the same for the Deep South," said Matt Rogers, president of Commodity Weather Group.
"We have enough warmer changes earlier in the period to still eke out a slight demand gain to mark the fifth day in a row of increases. The biggest overnight shift was a more significant pullback in temperatures on the European ensemble, but it was not a major pattern change and basically just drifted closer to the model consensus mean..."
Tim Evans of Citi Futures Perspective said Thursday's outsized storage build 65 Bcf may be "casting some doubt over the prevailing trend in the underlying supply-demand balance. It's possible that there were some timing issues between the two periods that contributed to the volatility, as well as some related issues involving nuclear plant outages."
Evans said that although the data was a "bearish surprise, we note the year-on-year surplus that was as high as 753 Bcf back on June 5 declined to a new low of 521 Bcf as of Aug. 7. This suggests that while the data for last week was bearish relative to expectations and relative to the five-year result, it was at least less bearish than a year ago.
"We've been making a case for natural gas futures to move back above the $3.00 mark, and that's still a possibility in our view, although Thursday's storage report was a clear setback and the revised neutral storage forecast is more consistent with further volatile sideways chop."
Texas power buyers over the weekend will be able to offset purchases with some wind generation. Forecaster WSI Corp. in its Friday morning report said that ERCOT "will be seasonably hot and moderately humid with high temperatures in the mid 90s to low 100s. A southerly flow will cause humidity levels to creep up during Sunday into early next week. This will lead to partly cloudy skies along with the chance of isolated pop-up storms, mainly along the Gulf Coast. Temperatures will generally range in the 90s to near 100.
"An east-southeast breeze will support models and changeable wind generation during the next couple of days. Output is forecast to peak during the overnight hours upward of 4-5 GW, but drop off and become weak during the midday hours. The wind will gradually turn more southerly during the weekend into early next week, which should cause output to increase a bit. Peak output levels might range 6-8 GW."