Next-day physical natural gas continued to romp higher in Tuesday's trading with all but one point followed by NGI solidly in the black, often by double digits.
The NGI National Spot Gas Average saw a 16-cent gain, 3 cents more than Monday’s 13-cent gain, to $2.85. A strong on-peak next-day power market helped the cause of higher prices. Points in New England flirted with near-$1 advances. California was also strong on higher loads and next-day power prices as well.
Futures started strong out of the gate but lost much of their mojo by the end of the session. At the close November had added 1.9 cents to $3.263 and December had added 2.4 cents to $3.505. December crude oil added 35 cents to $50.29/bbl.
Traders are on the lookout for lower prices. "I do like the natural gas market lower. I think it is an oversupplied market," said Alan Harry, director of trading at McNamara Options in New York.
"Right now I see a rangebound market, and I would like to see it break out of either side of its range, $3.15 and $3.357 is my number on the upside. I find that it’s difficult to make a case for a rally because it's too early in the season. November is about to come into an actual deliverable contract, so the cash will rule that, and that's all supply and demand.
"It's hard to believe that traders will keep the November contract up at these high levels when we don't have any heat and cooling going on. I'm looking for a range for the next two weeks and then a breakout. I think the breakout will be to the downside."
Analysts see the dynamic of continued decreases in the storage surplus as keeping a firm tone to the market. "The fact that this narrowing in the surplus is apt to continue through the remaining few weeks of the injection cycle without any significant assistance from either the temperature or storm factors attests to subsurface bullish developments that could keep values well supported, especially if the late fall period proves unusually cold," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients.
"Looking ahead through the rest of this week, short speculative position holders still appear on the defensive as a result of this month's considerable chart improvement. Although a test of last week's highs at the $3.36 area per November futures appears unlikely during the next couple of sessions, any bullish surprises in Thursday's storage report could easily force a run at this resistance. We will be viewing any injection of less than 70 Bcf as a bullish figure capable of keeping this short-term bull market alive."
Forecasters continue to see diminished heating and cooling load. WSI Corp. in its Tuesday morning outlook said, "[Tuesday's] 11-15 day forecast is cooler than yesterday's forecast over the eastern half of the nation but warmer over the West. PWCDDs are down 0.7 for days 11-14 and are only forecast to be 6.8 for the period. GWHDDs are up 4.4 to 53.9, which are still almost 12 below average.
"Forecast confidence is a touch below average due to diverging model solutions that begin late in the six-10 day period. There are also conflicting signals between the Pacific and high-latitude patterns."
In the physical market California prices proved stout as loads and power prices increased. CAISO forecast that peak load Wednesday would reach 32,041 MW, up from Tuesday's peak of 30,212 MW.
Gas at Malin rose 13 cents to $2.97, and deliveries to the SoCal Citygate added 9 cents to $3.14. Gas priced at the SoCal Border gained 12 cents to $2.95, and Kern Delivery was quoted at $2.99, up 13 cents.
Intercontinental Exchange reported that on-peak power Wednesday at NP-15 rose by $4.11 to $37.75/MWh, and power at SP-15 was up $2.11 to $38.14/MWh.
Next-day power at eastern points helped lift quotes as well. Intercontinental Exchange reported that on-peak power at New York ISO Zone A (western New York) rose $7.90 to $42.00/MWh and packages to Zone G (eastern New York) increased by $2.03 to $37.71/MWh.
Gas at the Algonquin Citygate jumped 89 cents to $3.05, and gas on Iroquois Waddington added 50 cents to $3.20. Deliveries to Tennessee Zone 6 200 L came in a stout 80 cents higher at $2.94.
Tom Saal, vice president at FCStone Latin America, in his work with Market Profile expected the futures market to test Monday's value area at $3.248 to $3.230 and "should test $3.296 to $3.272. Eventually the market should test $3.053 to $3.013."