Weekend and Monday physical gas went begging in Friday trading as traders noted a well-supplied market and a trend to moderating weekend weather. Flat pricing in Texas and Louisiana was no match for hefty declines in the Northeast, Appalachia, the Rockies and California, and the NGI National Spot Gas Average tumbled 8 cents to $2.59.
It was once again a tale of two coasts on Friday with Southern California and Northeast points leading the charge lower. Futures were held to a miserly 5-cent range, but at the end of the day July had added 3.5 cents to $2.929 and August was up 3.6 cents to $2.951. August crude oil continued higher, adding 27 cents to $43.01/bbl.
Eastern points tumbled as forecast energy usage over the weekend was seen falling sharply with Monday requirements far less than Friday. The New York ISO predicted Friday's peak load of 25,117 MW would decline to 21,269 MW Saturday and by Monday would reach only 20,534 MW. The PJM Interconnect expected Friday's maximum load of 46,278 MW to decline to 41,618 MW by Saturday and by Monday continue lower to 38,031 MW. ISO New England anticipated that Friday's peak load of 20,750 MW would fall to 18,500 MW Saturday and to 17,500 MW Sunday.
Gas at the Algonquin Citygate for weekend and Monday delivery skidded 62 cents to $2.37, and gas on Iroquois Waddington was down 26 cents to $2.63. Packages on Tennessee Zone 6 200 L were quoted at $2.39, down 55 cents.
Gas on Tetco M-3 Delivery came in at $1.81, down 15 cents, and gas bound for New York City on Transco Zone 6 shed 27 cents to $2.20.
Traders noted that much cooler weather was on tap for the weekend and next week.
"Much cooler air with temperatures more typical of mid- to late September will sweep across the Great Lakes and Northeast this weekend into next week," said AccuWeather.com meteorologists Friday.
"Temperatures will stay below average from later this weekend through the middle of next week," said AccuWeather.com meteorologist Max Vido. "Highs typically range from the middle 70s to the middle 80s during late June. However, as the core of the cool air settles in, high temperatures will be held to the 60s over the upper Great Lakes, near 70 in parts of the Ohio Valley and the upper 70s across the Interstate 95 corridor of the mid-Atlantic.”
Vido said some parts of the Midwest to central Appalachia “may challenge record lows established as far back as the early 1900s. Temperatures will dip into the 40s and lower 50s in much of the Midwest, and the 50s to the lower 60s along the Atlantic Seaboard early next week.”
Other market points did not see the same rambunctious pricing.
Gas at the Chicago Citygate fell 2 cents to $2.69, and deliveries to the Henry Hub rose a penny to $2.86. Gas on Northern Natural Demarcation was flat at $2.60, and gas on El Paso Permian shed 4 cents to $2.54.
California prices took a breather. Gas at the PG&E Citygate changed hands 3 cents lower at $3.12, and deliveries to the SoCal Citygate fell 36 cents to $3.01. Gas priced at the SoCal Border Average shed 19 cents to $2.66, and gas on El Paso S Mainline gave up 17 cents to $2.71.
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July natural gas opened 2 cents higher Friday morning at $2.91 as near-term weather forecasts had called for basically normal temperatures, and near-term traders mulled bearish conditions for next week.
"Forecast changes were related to low pressure tracking out of western Canada in the early stages and toward the Midwest, with temperatures adjusted warmer in the East at mid-period but cooler in the low's wake late in the Midwest,” said MDA Weather Services Friday in its isix- to 10-day outlook.
"Given model volatilities as it relates to this feature, confidence remains lower than usual for this lead time. In all, the forecast features near normal temperatures for most of the Eastern Half, with aboves focused in parts of the Interior West. While normal for the period, the East sees below normal temperatures early on and aboves on days 8-9."
Traders are looking for a spot to go long.
"We are keeping open a possible price drop to the $2.82 area while conceding that such a renewed decline will require some cooperation from the weather factor," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients. "Latest updates are generally indicating negligible change from about mid-week with much of the mid-continent now expecting normal temperatures later next week following a brief cooldown.
“This seemingly neutral temperature factor doesn't appear capable of sustaining price gains to above the $3 mark and as a result, we see some further price consolidation today mainly within the boundaries of yesterday's range.”
Looking to the coming week, he said “adjustments to the one-to-two week weather views will largely determine price action. While some support could be forthcoming from a further expected contraction of around 15 Bcf in the surplus against five-year averages, the extended Fourth of July holiday weekend could provide a bearish offset.
“Overall, we are still sidelined in this market while we will be looking to probe the long side on a renewed pullback into the $2.84-2.87 zone in referencing August futures."
Other traders already are buying.
"I am a scale-down buyer all the way to $2.80," Alan Harry, principal with Harry's RE Trust told NGI. "If it breaks $2.80 I will have no choice but to liquidate. To me it looks like the lows are in. We have had four hits around the bottom all at the same level, and it looks like a quadruple bottom.
“By mid-August to early September I think we see $3.50-3.60. We may fall somewhat from that, but then I expect a seasonal pop up from there."
Near-term, however, analysts see the bulls on the defensive next week.
"Modestly bearish headwinds entering the weekend and into next week," said industry consultant Genscape Inc. "Production is ticking back up while demand projects to be stagnant to declining with temperate weather and the return of strong non-gas fired generation. On the demand side, burns look flat to declining while exports remain suppressed.”
Genscape’s estimate for Friday’s power burn was down to a 12-year low of 28.8 Bcf/d, “with more declines expected. We have burns dropping to as low as 26.8 Bcf/d by Tuesday, and not getting back above 30 Bcf/d until next Thursday."