Unlike last week when physical natural gas prices careened lower as prospects for any meaningful cold looked dim, this week the likelihood of significant winter cold is still distant, but prices managed to make it to the win column to the tune of a few pennies.
The NGI Weekly Spot Gas Average gained 3 cents to $1.98 and most points were able to post gains of a few pennies to as much as a dime. Of the actively traded points the locations showing the greatest losses and the greatest gains came out of the East. The location showing the greatest gain was Transco Zone 6 NY adding 28 cents to average $1.72, and the biggest loser proved to be Algonquin Citygate dropping $1.34 to $2.65 followed by Tennessee Zone 6 200 L falling 94 cents to $2.53.
Regional averages mostly came within a nickel of unchanged. The Midwest fell 3 cents to $2.11 and the Northeast was flat at $1.66, but all other regions made it to the positive side of the trading ledger.
South Texas added 2 cents to $1.99 and East Texas rose by 3 cents also to $1.99. South Louisiana and the Rockies gained 4 cents to $2.01 and $2.02, respectively, and California was seen a nickel higher at $2.33. The Midcontinent had the week's greatest gain, 6 cents to $2.02.
December natural gas futures ended the week down a penny at $2.361 during a week that saw natural gas storage levels reach record levels.
Physical natural gas for weekend and Monday delivery was unchanged Friday as traders made sure they got their deals done prior to the typically volatility-enhancing weekly storage report.
Quotes routinely moved within a penny or two at most locations as temperature forecasts in major population centers continued to look uninspiring. The NGI National Spot Gas Average was unchanged at $1.94. The day's trading spotlight was focused on the futures market and how the market might react to reaching record storage. All indications appeared that the market had discounted the event days if not weeks earlier.
Thanks to the Veterans Day holiday, the Energy Information Administration (EIA) reported Friday an increase of 49 Bcf to 3,978 Bcf for the week ending Nov. 6, enough to establish an all-time record with perhaps as many as two more weeks of injections on the horizon. Futures nonetheless rose. At the close Friday, December was up 10.1 cents to $2.361 and January had added 8.1 cents to $2.526. Crude oil and equities both dropped.
The big price driver of the day was the delayed EIA weekly storage report. As the market now has to deal with injections well past the traditional season for storing gas, estimates for the week ending Nov. 6 were wide. Last year 47 Bcf was injected and the five-year average stands at 23 Bcf. Some estimates were as low as 44 Bcf (Genscape) and some as high as 78 Bcf (Citi). A survey of 24 traders and analysts by Reuters showed an average 51 Bcf with a range of 41 to 78 Bcf. The wild card seemed to be what adjustments to make to your model to account for lower gas prices prompting fuel switching by power generators.
When the number hit trading screens December futures rose to a high of $2.357, and by 10:45 a.m. EST December was trading at $2.354, up 9.4 cents from Thursday's settlement.
"We're trading near the highs of the day well after the number came out," a New York floor trader told NGI. "I guess people weren't sure what they wanted to do. Nothing has really changed all that much. We're still looking at $2.25 support and $2.50 resistance."
Inventories now stand at 3,978 Bcf and are 373 Bcf greater than last year and 173 Bcf more than the five-year average. In the East Region 31 Bcf was injected, and the West Region saw inventories increase by 3 Bcf. Stocks in the Producing Region rose by 15 Bcf.
In spite of the day's advance, analysts still see a fundamentally oversupplied market facing sub-par weather and sliding demand. "[L]ittle change is being seen within the short-term temperature views that remain tilted in favor of mild trends," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday. "These forecasts are beginning to stretch into the Thanksgiving holiday period when industrial demand will also be slipping due to four-day plant closures at some companies."
Ritterbusch was somewhat on the high side of storage estimates at 57 Bcf. "We still expect a bearish rather than a bullish surprise since our projected injection is north of average industry ideas by about a 6 Bcf margin," he said. "However, we are not expecting a major downward price response since large speculative entities appear fully allocated to the short side of this market and will likely be unwilling to establish bearish strategies even despite additional chart deterioration. Our stance remains unchanged as we will continue to await price advances of around 20 cents or so to re-establish shorts."
In Friday trading the market for weekend and Monday gas moved little as temperature forecasts at major population centers had readings well above normal by Monday. Forecaster AccuWeather.com predicted Friday's high in Chicago of 47 degrees would jump to 57 by Saturday before receding nominally to 53 by Monday. The seasonal high in the Windy City is 50. Detroit was forecast to see its Friday maximum of 45 rise to 49 Saturday and reach 57 by Monday, 10 degrees above normal.
Gas on Alliance rose a penny to $2.10 and packages at the Chicago Citygate slipped 3 cents to $2.08. Gas on Consumers was flat at $2.11 and deliveries to Michigan Consolidated added a penny to $2.12.
Price movement at major hubs proved equally lackluster. Gas at the Henry Hub was flat at $2.01 and parcels on El Paso Permian was unchanged at $1.90. Deliveries to Opal was also flat at $2.02 and gas at the PG&E Citygate rose a penny to $2.71.
New England points were generally stronger. Gas at the Algonquin Citygate rose 16 cents to $2.60 and deliveries to Tennessee Zone 6 200 L added 15 cents to $2.47. Gas at Iroquois, Waddington was flat at $2.16.
Gas buyers tasked with procuring gas over the weekend for power generation across the broad PJM footprint may not have to buy quite so much, as ample wind generation looks to be in play. WSI Corp. in its Friday morning report said, "Partly cloudy, breezy and cooler conditions are expected across the power pool during the next couple of days. High temps will dip into the mid 40s, 50s to near 60. Lows will dip into the 30s to low 40s. High pressure will build into the East for Sunday into Monday. This will promote fair and mild conditions with highs in the mid 50s to low 60s. High pressure will hang on over the Mid Atlantic into Tuesday, but a vigorous storm system over the central US may begin to spread rain, thunderstorms and gusty southerly winds into western PJM. It will be mild with highs in the upper 50s to mid 60s.
"A gusty west-northwest wind will continue to drive strong wind generation [Friday] with output as high as 5-6 GW. Wind gen will likely subside from this peak, but a mild southerly flow will support moderate and increasing wind gen during the weekend into early next week."
In Thursday's trading gas for Friday delivery slipped lower as mild temperatures in the East and Northeast along with soft New England power prices pressured quotes. Healthy drops were seen in Texas, the Rockies, and California. The NGI National Spot Gas Average fell 5 cents to $1.94. Futures trading was lackluster ahead of Friday's EIA inventory report as traders consolidated positions. At the close December was 0.3 cent lower at $2.260 and January had given up 0.7 cent to $2.445.
Futures traders continued to focus on weather and usage. "Although its getting cooler in the evening the daytime has been warming up where you haven't needed to pump up the heat. That probably says more about the market. There is just a lack of usage," said a New York floor trader.
Analysts see the market see-sawing between the forces of burdensome inventory and those of seasonal demand with the burdensome inventory camp winning out. "The market could also said to be consolidating ahead of the DOE storage report for the week ended Nov. 6," said Tim Evans of Citi Futures Perspective in closing comments Wednesday. "The news wire surveys seem to [show a consensus of ] 50-51 Bcf, a minor step down from the 52 Bcf build in the prior week despite warmer than normal temperatures that limited heating demand. Our weather-based model forecasts a significantly higher 78 Bcf refill, which we read as highlighting the risk of a bearish surprise."