There was little incentive for traders to commit to three-day weekend deals in Friday's trading as a double whammy of a weak screen and moderate weather outlooks weighed on physical natural gas markets.
Only two points followed by NGI managed gains, and the NGI National Spot Gas Average for weekend and Monday gas fell 8 cents to $2.23.
The East managed an overall gain of 3 cents, but that was due in large part to ongoing maintenance and restrictions in New England. Futures traders found the market spiraling lower as medium-term weather forecasts called for mild conditions and the injection season appeared ready for an extension well into November. At the close, November had fallen 10.0 cents to $2.286 and December was off 9.0 cents to $2.493. December crude oil sank below $45, posting a settlement of $44.60, down a stout 78 cents.
Midwest power generators are taking full advantage of lower natural gas prices.
"What we've seen has been a great benefit. We have two coal plant outages and one of our nuke contracts is offline this month," said a Wisconsin power generator. "The low gas prices drive the [power] market, and we are basically buying on the spot market this month with our units off, and we are looking at saving $5/MWh from what we had budgeted for buying load. That's a huge savings for us. It's a tug-of-war between how much revenue is lost on plants that would normally run, and how much you can buy at what savings and how does it all balance out." The generator's experience is that it has been a net saving.
"We have a combined-cycle generator tied to the Chicago Citygate price that has been running at much higher capacity. In July and August it ran around the clock which is unheard of."
Those savings continue to grow. Weekend and Monday gas throughout the Midwest fell hard. Deliveries on Alliance fell 11 cents to $2.34, and gas at the Chicago Citygate shed 6 cents to $2.30. Gas on Consumers was quoted 6 cents lower at $2.65, and deliveries to Michigan Consolidated were quoted 7 cents lower at $2.64.
Weekend and Monday temperatures across key population centers were expected to continue mild. Wunderground.com predicted that the Friday high in Chicago of 60 would rise to 67 Saturday before dropping to 60 on Monday, right at the seasonal average. New York City's 66 high on Friday was expected to ease to 59 Saturday and make it back to 60 on Monday. The normal high in New York is 61 this time of year.
The Algonquin Citygate was one of the few points to record a gain. Weekend and Monday deliveries came in 38 cents higher at $5.18 as maintenance and outages continued. By contrast deliveries to Tennessee Zone 6 200 L fell 66 cents to $4.37 as gas was able to make it from other supply sources. Gas on Iroquois, Waddington shed 15 cents to $2.87.
Marcellus prices were soft. Gas on Tennessee Zone 4 Marcellus fell a dime to $1.17, and deliveries to Transco-Leidy Line also retreated a dime to $1.24.
In spite of Thursday's November futures drop to new three-plus year lows, analysts see still further weakness for the December contract as well.
"[Thursday's] counter-intuitive downside response to what appeared to be a bullish storage figure fortified our bearish convictions of this market," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday. "We still advise accepting partial profits at our long targeted $2.35 level basis November futures. However, we suggest maintaining a core short position in the December contract as we maintain a downside target of $2.35 looking out over the next two- to four-week time frame."
For now, the temperature factor is maintaining a neutral-bearish appearance when extending a view out through the about the first week of November. Furthermore, attainment of the psychologically important 4 Tcf end of season supply level is possible with such a development only requiring an average weekly build of about 62 Bcf/week during the next three weeks.
Gas buyers for power generation across the MISO footprint over the weekend should have ample renewable energy supplies to work with. WSI Corp. in its Friday morning report said, "A storm system will move across the power pool during the next one to two days with a chance for rain and embedded storms, as well as blustery conditions. This will usher high pressure and seasonable conditions into much of the power pool during the end of the weekend into the start of next week, though a storm system will bring heavy rain into Entergy.
"High temps will dip into the mid 40s, 50s and 60s. The next potential frontal system and round of wet weather will likely slide into the north-central U.S. by Tuesday. A south-to-northwest wind associated with the frontal system will drive strong wind generation during the next two days. Output might top out as high as 7-9 GW. Wind gen will relax and become more variable during Sunday and Monday. The next potential storm system should drive up wind gen by Tuesday."
Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile said to look for the market to test Thursday's value area at $2.400 to $2.358 and "maybe" test a second value area at $2.493 to $2.473.