Weather forecasts at major population centers in the East and Midwest showed a mild pricing regime, and physical natural gas buyers for the most part elected to take a pass on three-day deals for weekend and Monday volumes.
Big declines were seen a eastern points, close to 20 cents on average, and the overall NGI Daily Spot Gas Average fell 9 cents to $2.42. Futures managed to wrestle their way to a small gain with the October contract adding 1.0 cents to $2.693 and November gaining 0.8 cent to $2.767. October crude oil skidded $1.29 to $44.63/bbl.
Weekend and Monday gas prices fell hard in the Northeast, but prices in the Marcellus were mixed as buyers and sellers sort out ways to take advantage of newly developed capacity to move gas west into higher-value Midwest markets.
The large volumes of eastbound Colorado gas that used to arrive at Clarington (non-Tenn), OH, on Rockies Express Pipeline (REX) have now been replaced by gas out of the Marcellus and Utica shale basins seeking higher value in the Upper Great Lakes and Midwest markets. As shown on the NGI’s Rockies Express Zone 3 Tracker, stout volumes are making their way west on REX to interconnects with major Midwest shippers such as Panhandle, Trunkline, NGPL, Midwest and ANR.
For the moment, however, producers, marketers and shippers out of the Marcellus are trying to get their ducks in a line to deliver the gas. Cooling demand is waning and winter heating has yet to begin and at present there is extra capacity, and Marcellus and Utica gas has a lot of catching up to do to establish any kind of parity with markets to the east and west.
According to NGI markets analyst Nate Harrison, REX Zone 3 receipt capacity jumped Friday from 1,565.5 to 2,029.5 Dth/d due entirely to an increase at Rice/Rex Gunslinger Monroe in easternmost Ohio. "At Gunslinger, receipt capacity increased from 205,000 Dth/d, where it had been since Sept. 1, to 669,000 Dth/d. The increase in Zone 3 capacity without a corresponding increase in actual receipts brought overall Zone 3 receipt point utilization down from 87% to just 69.5% for Sept. 11 flow," he said.
Gas on Millennium was flat at $1.15, and gas at Transco Leidy shed 3 cents to $1.13. Deliveries to Tennessee Zn 4 Marcellus was up a nickel to $1.11, and gas on Dominion South fell 6 cents to $1.16.
Midwest and Great Lakes markets, by contrast, held lofty premiums. Gas on Alliance for the weekend and Monday shed 2 cents to $2.74, and deliveries to the Chicago Citygate eased 3 cents to $2.68. On Consumers, gas changed hands at $3.01, up 2 cents, and packages on Michigan Consolidated 2 cents higher as well to $2.97.
Other market points were soft. Gas at the Henry Hub fell 5 cents to $2.66, and deliveries to El Paso Permian shed 7 cents to $2.53. Gas at Opal was quoted 2 cents lower at $2.57.
Weather forecasts for the weekend were not particularly supportive of firmer pricing. Wunderground.com reported that Chicago's high of 67 degrees Friday would slump to 62 Saturday and reach 77 on Monday, the seasonal norm. Boston's 73 maximum Friday was seen rising to 75 Saturday but dropping to 70 on Monday, 4 degrees below normal.
Based on Thursday's thinner than expected Energy Information Administration (EIA) reported storage build, analysts see a slight firming of the supply-demand balance.
"The 68 Bcf build for last week lifted the total in working storage to 3.261 Bcf, a surplus of 473 Bcf to a year ago and 127 Bcf above the five-year average for the date," said Time Evans of Citi Futures Perspective in closing comments Thursday. "While smaller than expected, the build was still more than the 63 Bcf five-year average injection and therefore slightly bearish on a seasonally adjusted basis.
"The data does suggest a tighter supply-demand balance, particularly relative to the 81 Bcf projection from our own storage model. Since our model uses a blend of several prior weeks to calculate its baseline, last week's report doesn't translate into a radical change in outlook, but it does result in a less bearish picture compared with a day ago."
He now concludes that by Sept. 15, the year-on-five-year surplus will reach 154 Bcf "confirming that the market is becoming better supplied on a seasonally adjusted basis, but this looks like a significantly lighter downward pressure on prices than a day ago."
In spite of the modest bullish tonality to the report Evans said the "bullish surprise still wasn't enough to break October natural gas out of the $2.632-2.735 range...We continue to favor an eventual break to the upside in anticipation of stronger winter demand, but we can't rule out a try for new lows first."
Trade-wise, Evans suggests working an October buy stop at $2.76 as an long entry into the market with a protective stop at $2.62 to limit risk once the trade has been initiated.
In a noon update Thursday Natgasweather.com said, "Nothing has changed regarding weather patterns as they still look quite bearish due to a strong Canadian weather [pattern] having swept through much of the central, northern, and eastern U.S. with near to below normal temperatures, easing natgas-based cooling demand considerably compared to earlier this week. We expect reinforcing cool blasts to follow into the northern and eastern U.S. into early next week, preventing hot high pressure from setting up over these critical natgas regions."