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NatGas Cash Surges in Monday Trading, But Futures Sag

Next-day natural gas prices rose across the board in trading Monday as ongoing warm temperatures and a hefty increase in next-day power prices provided gas buyers for electrical generation all the incentive needed to make incremental purchases.

None of the points followed by NGI fell into the loss category, and most points were up by well more than a dime. Several points, albeit newly minted, scored all-time highs, and the NGI National Spot Gas Average rose 17 cents to $2.68.

Futures trading was far less inspired, but October was able to partially close opening losses. At the close October had eased 1.4 cents to $2.934, and November had given up 1.6 cents to $3.005. October crude oil rose 27 cents to $43.30/bbl.

According to the NGI REX Zone 3 tracker, volumes flowing west out of Clarington (non-Tenn), OH are at 100% of design capacity at 1.8 Bcf/d, but all that gas was no deterrent to several points making all-time highs. A record high of $2.94 was reached at the interconnects with Midwestern Pipeline at Edgar County, Il, the NGPL connection with NGPL at Moultrie County, IL, and the ANR junction in Shelby County, IN.

Unfortunately, all that flow has not been able to lift Marcellus prices still hovering just above $1, but that could change as competing pipeline proposals abound to move gas out of the Marcellus into higher priced Midwest markets.

Rover Pipeline, Nexus Pipeline and a TransCanada Corp. project known as the Kings North Connection are but a few on the table. A Texas-based industry specialist told NGI that several shippers had discussed the alternatives and said Rover is likely be built because of favorable economics.

Major market centers advanced. Gas at the Chicago Citygate added a dime to $2.98, and gas at the Henry Hub rose 3 cents to $2.97. Deliveries to Opal came in 11 cents higher at $2.75, and deliveries to PG&E Citygate rose 11 cents to $3.42.

Elsewhere, maintenance on PG&E "will cut about 350 MMcf/d of Redwood Path flows” on Tuesday, industry consultant Genscape Inc. reported. It "expects the pipeline to make up these volumes by increasing net storage withdrawals and possibly with a slight increase in Baja Path flows.

“Maintenance at PG&E's Delevan Station will restrict Redwood Path capacity to 1,585 MMcf/d on Tuesday and to 1,918 MMcf/d on Wednesday. Over the past 14 days flows averaged 1,934 MMcf/d, putting 349 MMcf/d at risk on Tuesday."

Ongoing warmth continues to be the direction forecasters are taking.

"While changes are mixed from Friday, the general themes of a warm-prevailing pattern look to continue," said Commodity Weather Group President Matt Rogers in a Monday morning report. "Mixed regional changes include a cooler Southwest and East Coast in the six-10 day,” versus Sunday’s outlook, while the Midwest to South may edge warmer.

"A back-door cooling complicates the Northeast, especially later this week into the weekend, which limits prior warmth potential,” he said. “This seems to mainly kill off some late-season cooling demand rather than adding much early season heating concerns.”

Above-average cooling requirements are expected in major energy markets. The National Weather Service forecast for the week ended Sept. 24 that New England would see 26 degrees cooling degree days (CDD), or 25 above normal. New York, New Jersey and Pennsylvania were expected to have 35 CDD, or 27 above normal, and the greater Midwest from Ohio to Wisconsin was seen with 32 CDD, or 23 above normal.

Traders saw last week's strength come in part from international developments. The “little rally” last week resulted from supply disruption in Europe following several earthquakes in Europe’s biggest gas field, Groningen, in the Netherlands, because of drilling activity, said DEVO Capital President Mike DeVooght.

"Dutch regulators have imposed caps on natural gas output, and there could be some big cuts coming in European natural gas supply as they continue to evaluate seismic data in that field,” he said. The Energy Information Administration storage number “was considered neutral this week as they were expecting a build of 60 Bcf ,and they got a build of 62 Bcf. We still believe as we approach the end of the cooling season...a sideways to lower trade over the next three to four weeks barring any major world event.

"On a trading basis, we will continue to use rallies approaching the $3 level on the spot market as an opportunity to establish producer collars with floors in the $2.50-2.75 range and a ceiling around the $4.00 level."

In its Monday morning report, the National Hurricane Center said Tropical Storm Karl was 930 miles east of the Leeward Islands and was sporting winds of 40 mph. It was heading west at 15 mph and projected to track toward Bermuda.

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