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Strong Power Demand, Prices Lift NatGas Cash; April Adds A Nickel

Next-day physical natgas vaulted higher, aided by hefty demand increases for energy in New England and the Mid-Atlantic as well as a strong screen.

Outside of New England gains of a dime to 20 cents were common, and no point followed by NGI fell anywhere close to the loss column. TheNGI National Spot Gas Average jumped 25 cents to $3.06, and locations in New England showed multi-dollar gains.

Futures posted gains of their own, breaching important technical upside resistance points. At the close, April had added 5.2 cents to $3.093 and May had gained 5.7 cents to $3.155. April crude oil went out on a wing and a prayer, dropping 88 cents to $47.34/bbl.

Big jumps in forecast energy demand and prices across New England and the Mid-Atlantic helped propel Northeast points to multi-dollar gains. Intercontinental Exchange reported that on-peak power for Wednesday delivery at ISO New England's Massachusetts Hub jumped $17.55 to $49.18/MWh and on-peak next-day power at the PJM West terminal added $6.95 to $38.23/MWh.

Gas at the Algonquin Citygate responded by soaring $3.58 to average $6.87, and deliveries to Iroquois Waddington rose 63 cents to $3.83. Parcels on Tennessee Zone 6 200 L rocketed to a $3.42 gain at $6.81.

Gains farther south were hefty but somewhat more muted. Gas on Texas Eastern M-3, Delivery rose 32 cents to $3.17, and gas on its way to New York City on Transco Zone 6 were quoted 39 cents higher at $3.36.

Next-day power price strength was not limited to the East. Intercontinental Exchange reported that next-day peak power at the Indiana Hub changed hands $2.29 higher at $34.29/MWh.

Gas at the Chicago Citygate rose a dime to $2.99, and deliveries to the Henry Hub changed hands 14 cents higher at $3.06. Parcels on El Paso Permian came in 10 cents higher at $2.68, and gas at Opal rose 9 cents to $2.69. Gas at the PG&E Citygate rose a dime as well to $3.26.

Power loads were also called higher. ISO New England forecast that Tuesday's peak load of 15,280 MW would jump to 16,900 MW Wednesday before settling down to 16,440 MW Thursday. PJM Interconnection predicted peak load Tuesday of 33,164 MW would reach 36,628 MW Wednesday and 37,779 MW Thursday.

In closing comments Tuesday Jim Ritterbusch of Ritterbusch and Associates said, "[T]he chart picture still looks conducive toward higher levels, at least over the balance of this week. Although lack of bullish impetus from the temperature factor will be providing an impediment to additional gains, the market appears to have gathered enough bullish momentum off of power demand and downsized production to respond vigorously to Thursday's EIA release. But we also feel that a withdrawal of more than 150 Bcf may be required to sustain this week's price up-spike and could potentially carry nearby futures to as high as the $3.18 level where we may look to approach the short side.

"Extending a view out to next month, we are leaving open the possibility of a decline in May futures to below the $2.90 level where we will look to initiate a scale down buying program. Finally, the 2017 time spreads have generally strengthened to the narrowest contangoes since the beginning of last month and we will caution against the bull spreads for now.”

Overnight weather models came in on a moderate note, with heating load still expected to be below normal. "[Tuesday's] 11-15 day period forecast is warmer than yesterday's over the Northeast and West but cooler over the Midcontinent," said forecaster WSI Corp. in a Tuesday morning report to clients. "CONUS GWHDDs are down 1.3 for days 11-14 and are now 58.6 for the whole period. These are 20.1 below average.

"The timing and details of potential storm systems are key, which is related to the amplitude of the pattern. The southern and eastern U.S., as well as California have some warmer potential. The Rockies, Front Range and north-central states have some colder risks."

According to government figures, heating requirements for the week ending March 25 across major population centers are expected to be mixed. National Weather Service (NWS) forecast that New England would see 203 heating degree days (HDD) or 16 more than normal, and the Mid-Atlantic would experience 189 HDDs, or 17 more than its norm. The greater Midwest from Ohio to Wisconsin was anticipated to have 159 HDDs, or 21 fewer than normal.

Analysts see the focus on storage balances beginning to wane as expectations surface of a more balanced storage dynamic. "Winter-like weather conditions finally returned -- catching many off guard -- with some parts of the U.S., primarily in the Northeast and Midwest, facing the coldest temperatures of the year," said PIRA Energy in a Tuesday morning note to clients.

"The belated return of cold air from the Arctic put an end to worries that U.S. storage levels would swell to 2.2+ Tcf, which was weighing heavily on price expectations throughout February. The end of such concerns is allowing attention to shift back onto the other issues at work that have tightened weather-adjusted balances and kept gas prices at about $3/MMBtu throughout much of the heating season."

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