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NatGas Cash, Futures Drift Higher In Uninspired Trading; August Adds 2 Cents

Summer Doldrums were in full force during Friday natural gas trading for weekend and Monday delivery. Modest gains in Appalachia, the Northeast, and Texas were offset somewhat by flat pricing at most other market points.

Most locations moved a few pennies either side of unchanged and the NGI National Spot Gas Average rose a penny to $2.71. Futures were equally lackadaisical with traders acknowledging ongoing heat, but not at a level to make a significant dent in supplies. At the close August had risen 1.9 cents to $2.980 and September was up 2.3 cents to $2.971. August crude oil made it five for five gains on the week, adding 46 cents to $46.54/bbl.

New England showed some of the stoutest gains with deliveries to the Algonquin Citygate rising 25 cents to $2.51. The National Weather Service (NWS) in southeast Massachusetts said Friday that that the risk of showers and thunderstorms in the Boston area would increase from west to east into Saturday morning. "A drying and warming trend develops this weekend, especially for Sunday. Seasonably warm conditions and humid for early next week, along with the chance for scattered afternoon into evening showers and thunderstorms Monday through Wednesday,” NWS said.

Other market points move much less. Gas on Transco Zone 6 into New York City fell 4 cents to $2.37 and deliveries to Tetco M-3 rose 2 cents to $2.07. Gas on Dominion South was quoted a penny higher at $2.00.

Further west price movements were equally uninspiring. Gas at the Chicago Citygate changed hands a penny higher to $2.79 and gas at the Henry Hub was seen a penny lower at $2.93. Gas on El Paso Permian ticked a cent higher to $2.55, and deliveries to Panhandle Eastern fell a penny to $2.52.

Gas at Opal fell 3 cents to $2.58 and gas priced at the SoCal Citygate was quoted a nickel higher at $3.16.

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Physical traders may enjoy some price gains next week as demand is expected to show some modest restoration as temperatures warm according to industry consultant Genscape. The firm said its metrics show CDDs running above normal next week, climbing daily towards a high of 159 by next Thursday, about 27 CDDs above normal for this time of year.

"The bulk of the increases are expected to come from higher-population markets in the Northeast, Midwest, and West Coast. Accordingly, we have total Lower 48 demand forecast to average 63 Bcf/d during the work week, reaching a forecast high of 64.1 Bcf/d on the 20th. Power burns are forecast to crest 35 Bcf/d, but remain well shy of the season-to-date high of 39.3 Bcf/d established [Thursday]."

August natural gas opened a penny higher Friday morning at $2.97 as traders saw forecast weather sufficiently supportive to maintain at least a temporary price equilibrium. Overnight oil markets rose.

Little change was reported in overnight weather model runs. "The 6-10 day period forecast is generally warmer than yesterday's forecast over portions of the central and eastern US," said WSI Corp. in its morning report to clients. "The West is cooler." Continental United States population-weighted cooling degree days "are up 0.6 to 68.8 for the period, which are 12.8 above normal."

Inasmuch as agreement between weather models was considered good, overall forecast confidence is average with the evolution of the mid-high latitude flow and pulse of hot weather early in the period. "However, model spread and uncertainty with wet weather causes confidence levels to decrease as the period progresses."

"Nothing has really changed," said a New York floor trader. "We are still in the same ranges."

In spite of the generally warm weather forecast, "expected deviations from normal don't appear sufficient to support nearby gas futures much above the $3.00 mark for now," said Jim Ritterbusch of Ritterbusch and Associates. "But while [Friday's] trade is off to a soft start, we expect seller caution ahead of a weekend that could bring some significant adjustments to the one- to two-week temperature outlooks. The storage excess against five-year averages narrowed to 172 Bcf with yesterday's data with the overhang likely to narrow toward 150 Bcf with next week's numbers given this week's warm temps. But while yesterday's supply numbers offered some reinforcement to our near term bullish view, the market will require some additional hot weather beyond next week if our $3.12 upside price target is to be achieved."

Ritterbusch says he is holding on to a bullish outlook for now and his upside target is quite reasonable at just $3.12 per nearby futures. "Any bullish updates to the weather views this weekend could expedite price movement toward our target. But we will also note that the physical market is having difficulty gaining any bullish traction as it softened again yesterday back to below the 2.95 level amidst milder Midwest temperature patterns."

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