Physical gas for delivery Tuesday gained ground as double-digit increases at California and Rocky Mountain points led the charge higher, along with cooperation from a strong screen. Only a few points turned lower, and the NGI National Spot Gas Average added 6 cents to $2.67.
New England points experienced some outsized gains as weather forecasts turned warmer and forecast power loads jumped. Futures traders jumped on near-term weather forecasts as well. At the close Monday, October had tacked on 11.8 cents to $2.915, and November was up 9.6 cents to $2.986. October crude oil turned around from early losses and rose 41 cents to $46.29/bbl.
Supportive weather outlooks turned out to be all the bulls needed. Forecaster Commodity Weather Group President Matt Rogers on Monday said he saw somewhat higher demand, as September is forecast to be moderately warm.
"The latest model runs overnight gained to edge the overall assessment to marginally increased demand compared to Friday's forecast,” Rogers said. “This keeps September running on track to be a warm-dominated month.
"While Texas remains mostly soft, we see signs that the West Coast could finally heat up a bit more by the six-10 day period and again in the 11-15 day (especially on the European guidance). Given the time of year, increased pattern variability is a reasonable risk, but the low global wind gives warmer conditions the upper hand, mostly.”
Market observers, however, see the market working lower as storage builds during the shoulder season.
On Aug. 31, the October contract settled at $2.89/MMBtu, Societe Generale analysts said in a note last Friday. A week later, it settled nearly 20 cents lower.
“A bullish storage support ran the contract back up over $2.80/MMBtu” last Thursday, which was a “decent amount of price variability within a short amount of time, considering there was no real change in the underlying fundamentals or weather; the market seems keen to move off any small data point.”
Now with less than 60 remaining to the end of October, “a current storage level of 3.44 Tcf, and a key EOS [end of season] psychological threshold at 4 Tcf, the injection pace needs to average around 9.5 Bcf/d,” analysts said. “The same time period last year saw a 12 Bcf/d injection pace.
“Power generation will need to hold up to keep this year's pace contained. Support can come from weather or price; we are indifferent to which, but not particularly comfortable relying on weather. We think a return to the $2.50-2.70/MMBtu range is what the market needs in order to keep some tightness in the ledger through end of season."
That injection pace might get tested this week as weather-driven demand looks soft.
"Our demand forecasts for this week do not show any particular weather-driven volatility," said industry consultant Genscape Inc. in a Monday morning report. "Most regions' 30-year normals begin flipping to heating degree days this week, though forecasts suggest otherwise. Temperatures in western markets will continue to run below seasonal norms through this week, while Midwest, southeast and eastern temps will run slightly above normal, but not enough to trigger substantial cooling loads."
In physical market activity, Tuesday gas at New England points jumped as temperatures were expected about 8 degrees above normal Tuesday and load forecasts surged. ISO New England predicted Monday's peak load of 16,230 MW would rise to 17,550 Tuesday before jumping to 19,050 MW Wednesday. The PJM Interconnect estimated Monday's peak load of 39,650 MW would surge to 42,211 MW Tuesday and ramp up to 46,473 MW Wednesday.
Gas at the Algonquin Citygate rose 27 cents to $3.27, and deliveries to Iroquois, Waddington were quoted 7 cents higher at $3.09. Gas on Tenn Zone 6 200L changed hands 30 cents higher at $3.17.
Marcellus points for the most part were stuck in neutral. Gas on Dominion South shed a penny to $1.24, and packages on Tennessee Zn 4 Marcellus added 2 cents to $1.25. Deliveries to Transco-Leidy Line came in 3 cents higher at $1.23.
Major market centers added close to a dime. Gas at the Chicago Citygate rose 8 cents to $2.92, and deliveries to the Henry Hub added 7 cents to $2.99. Gas priced at the SoCal Border Avg. gained 14 cents to $2.84.
At 5 p.m. EDT on Monday the National Hurricane Center (NHC) reported Tropical Storm Ian was located 1,080 miles east southeast of Bermuda and was heading to the north-northwest at 13 mph. Maximum sustained winds were 40 mph and the NHC predicted a turn to the northeast into the North Atlantic.