Both natural gas cash and futures staged stout gains in trading Monday, in spite of a weather environment that looked anything but supportive. Leading the pack to new highs were Marcellus points, but no points followed by NGI showed losses.
The NGI National Spot Gas Average rose a hefty 25 cents to $2.16, and all points were deep into double-digits. Futures hit the trail higher early with an opening gain of 8 cents, but by the close December had added 13.0 cents to $2.749, and January had risen 8.7 cents to $2.937. December crude oil shed 9 cents to $43.32/bbl.
Market technicians see the market set up for a healthy move higher, though not exceeding earlier highs.
"In Elliott Wave terms the market is right on a break point,” said United ICAP Vice President Walter Zimmermann. “If it breaks higher from here, it definitely creates room to the upside. Any further upside and we will have a bear market correction of the most recent leg down.” He said the Organization of the Petroleum Exporting Countries, OPEC, “and the strong dollar are likely to be in the way of new market highs. Cold weather will not solve the problem. The U.S. dollar is going to have to stop skyrocketing.
"Conservatively, I think we could see anything from $2.94 to $3.04," he said.
Even though clouds are darkening over the longer-term weather outlook, analysts see a supportive political environment going forward and healthy prices in 2017.
A leading industry consultant has taken a look at broad weather patterns and suggests that the ongoing warmth is likely to persist deeper into the traditional heating season. In addition to a lack of ridging in the Gulf of Alaska, Genscape Inc.’s analysts pointed to a dearth of snow cover over North America.
"At this point in a typical November, snow coverage extends southward close to the U.S.-Canadian border,” said Genscape’s analysts. “At the start of the record cold winter 2013-2014 (which started relatively normal), the latitudinal snow line extended to the U.S.-Canadian border, and even farther south into areas like the western Great Lakes and upper New England.
“At this date last year there was coverage across the Western Canadian provinces and extending southward into the U.S. along the Continental Divide. Presently, however, there is virtually no appreciable snow coverage south of northern Quebec."
Genscape also pointed to emerging La Nina conditions, which feature warmer- and drier-than-normal conditions across the southern two-thirds of the United States, with cooler-than-normal conditions for Western Canada and north-central and west coast U.S. states.
"La Nina is generally not regarded as a major influence on Northeast and Mid-Atlantic weather. The last La Nina event featured in the U.S. and Canada was during the remarkably warm winter 2011-2012. We wish to note, however, that there are significantly more factors that will influence this winter's weather than just ridging, snow cover, and La Nina," Genscape analysts said.
Traders and analysts are mulling the likely impact of a Trump presidency on the natural gas industry and markets, and as yet the consensus seems to be generally positive, but key details such as the role of coal versus natural gas have yet to be ironed out. The president-elect's promise to bring back the coal industry, as well as questionable views about climate change, could have a negative impact, according to energy experts.
"A Republican nominee in general tends to be more industry friendly than not, so I would say the industry as a whole saw Trump as more supportive...than not," said Societe Generale analyst Breanne Dougherty. "I can't really think of too many things that would be first on the list of this president-elect that would really affect natural gas prices in any sort of material way."
Societe Generale still expects 2017 gas prices to average $3.50/Mcf. In 2018 gas prices are expected to peak at around $3.90/Mcf, with longer-term prices averaging $3.50.
In the physical market, Marcellus points continued to make new highs.
Gas on Dominion North traded at $1.96, up 13 cents but above the previous year's high of $1.91. Gas priced at the Tennessee Zone 4 313 Pool rose a dime to $2.00 to surpass its one-year high of $1.93. Gas on Transco Leidy rose 16 cents to $1.92, a dime over its previous one-year high of $1.82. Not to be outdone, gas at the Millennium East Pool changed hands 12 cents higher at $1.94, 7 cents higher than its one-year high.
Major market points scored impressive gains as well. Deliveries to the Chicago Citygate jumped 22 cents to $2.22, and deliveries to the Henry Hub were quoted 19 cents higher at $2.22. Deliveries to El Paso Permian vaulted 33 cents to $2.03 and gas on PG&E Citygate came in 57 cents higher at $2.82.