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Little Change Seen in NatGas Cash, Futures; October Fractionally Higher

Buyers and sellers of physical natural gas for Wednesday delivery by and large drew to a tie in Tuesday's trading.

Scattered double-digit losses in the East and Northeast were largely offset by more modest but broader gains in the Midcontinent, Gulf Coast, Rockies and California. NGI‘s National Spot Gas Average was up a penny at $2.46. Futures trading was equally lackluster as October and November drew to a mixed close. October added 0.4 cent to $2.577 and November eased 0.3 cent to $2.639. The expired October crude oil contract dropped 85 cents to $45.83/bbl.

Natural gas continues to find its way west out of the Marcellus and Utica into higher priced markets. Not only are volumes flowing on the Rockies Express Zone 3 expansion, but according to industry consultant Genscape, increasing flows are making their way west on a recent Texas Eastern project as well. The expansion transports gas from southwestern-most Pennsylvania to north of Indianapolis. "Panhandle receipts from TETCO's new Uniontown-to-Gas City (U2GC) project have been running at about 70% capacity since the project came into service Sept. 1," the company said in a report.

"Panhandle receipts at its Lebanon meter have been averaging 292 MMcf/d, reaching as high as 309 MMcf/d last Friday. TETCO's U2GC came into full service on Sept.1. The project created an additional 425 MMcf/d of westward flow along TETCO's mainline between its Uniontown compressor and Lebanon, OH, bringing total capacity along that segment up to 600 MMcf/d. The U2GC project is subscribed by CNX, East Resources, EQT, Range Resources and Rice Energy."

Those flows, however, are dwarfed by the gas flowing west on Rockies Express Zone 3. According to the NGI Zone 3 Tracker, flows for Sept. 22 were at a stout 1,440.5 MMcf/d out of 2,049.5 MMcf capacity.

Marcellus points were mostly lower in Tuesday's trading. Deliveries to Tennessee Zn 4 Marcellus slipped 9 cents to $1.05. Parcels on Transco-Leidy Line were seen at $1.18, down a penny, and gas on Dominion South added 3 cents to $1.29.

What a difference a few miles can make. Deliveries to Lebanon, OH, situated in southwestern Ohio changed hands a penny higher at $2.57.

Next-day gas at northeast and Mid-Atlantic points followed the path of next-day power. Intercontinental Exchange reported that Wednesday on-peak power at the ISO New England's Massachusetts Hub fell $1.11 to $29.93/MWh, yet on-peak power at the PJM West terminal rose $3.05 to $34.75/MWh.

Next-day gas at the Algonquin Citygate tumbled 42 cents to $2.71, and gas on Iroquois, Waddington shed 31 cents to $2.61. Deliveries to Tenn Zone 6 200L gave up 25 cents to $2.70.

Wednesday gas at Tetco M-3 Delivery, however, rose a penny to $1.37, and gas on Transco Zone 6 NY gained 19 cents to $2.34.

Traders said Tuesday morning that the time may be ripe to take profits on short positions. "Although this market fell a few cents more than we had expected, we still look for some price gravitation at around the $2.58 area where we have suggested acceptance of profits out of any short positions," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients.

"Our next trading stance will be developing toward the long side of this market, but we will await more support evidence before advising a scale-down purchasing program, probably within the $2.50-2.58 zone. Short-term fundamentals appear decidedly bearish at the present time, and some fresh lows should not be ruled out. The consensus of short-term temperature forecasts continues to favor unusually mild trends that are now stretching through the first week of October in most cases. This should accommodate some triple-digit storage injections, possibly beginning with this Thursday's EIA release."

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