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Physical NatGas, Futures Continue March Higher; October Up A Nickel

Both physical natural gas and futures managed to turn in a second day of advances, with softness at Appalachian and Northeast points unable to counter widespread gains in Texas, Louisiana, the Rockies and California.

The NGI National Spot Gas Average added 8 cents to $2.65. New England locations were expected to see late-summer warmth, but in the Mid-Atlantic temperatures were forecast closer to seasonal norms.

October futures managed a settlement above $3 as traders suggested short covering by those anticipating greater demand losses off Hurricane Irma. At the close October had risen 5.1 cents to $3.001, and November had added 4.8 cents to $3.067. October crude oil rose 16 cents to $48.23/bbl.

"I think a lot of traders saw all this demand destruction coming off these storms," said Scott Shelton, broker with ICAP Commodities. "The majority of infrastructure is back on post-Harvey and LNG [liquefied natural gas] exports set a new record today [2.8 Bcf compared to a 2.3 to 2.5 Bcf before the storm], so that infrastructure is coming back full bore and there's a little bit of late weather in the South.

"Obviously Florida has issues, but other areas are pretty warm. The weather is coming back a little more bullish than people thought, and if anything the LNG exports are printing new highs. There are other events out there to offset Florida Power and Light as well as general storm related demand destruction that had everyone all beared up last week.

"I don't think this has much in the way of legs higher, maybe another 5 cents to 10 cents tops.

Other traders also see limited upside. "[Tuesday's] price advance carried further than we expected and appeared largely attributable to additional updates to some warm temperature views that are extending well into the final week of this month," said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients.

"But despite today's advance to above the $3 mark, we are still not expecting much upside follow through since cooling degree day accumulation is unlikely to be sizable at this much advanced stage of the summer. Regarding Thursday's weekly Energy Information Administration storage report, we are looking for an increase in the supply surplus against 5 year averages of around 12-15 Bcf that would keep futures vulnerable to any unforeseen supply disruption. Overall, we remain sidelined with nearby futures trading at about the middle of our expected $2.88-3.14 price parameters."

In physical market trading New England points posted gains, but Mid-Atlantic locations slumped as temperatures were forecast closer to seasonal norms. AccuWeather.com predicted Boston's Tuesday high of 86 would ease slightly to 83 Wednesday and hold Thursday, 9 degrees above the seasonal norm.

Gas at the Algonquin Citygate rose 12 cents to $2.07 but packages on Iroquois Zone 2 fell 2 cents to $2.43.

The National Weather Service in southeast Massachusetts said, "Warm and dry weather will continue Wednesday, then humidity levels and the risk of showers and an isolated thunderstorm will increase Thursday and especially Friday. Mainly dry and seasonable conditions return for the weekend. Hurricane Jose likely passes well to our east early next week with little impact, but still bears watching."

Next-day prices in the Mid-Atlantic, however, fell. AccuWeather.com forecast that New York City's Tuesday high of 82 would ease to 80 by Wednesday before dropping further to 78 Thursday, 2 degrees above normal.

Gas on Tetco M-3 Delivery shed 6 cents to $1.14, and gas bound for New York City on Transco Zone 6 fell 5 cents to $2.29.

Deliveries to the Chicago Citygate came in 6 cents higher at $2.89 and gas at the Henry Hub was seen at $2.89, up 4 cents. Packages on Transco Zone 4 were quoted 6 cents higher at $2.89, and gas on El Paso Permian rose 6 cents to $2.71.

Gas priced at Opal added 8 cents to $2.73, and deliveries to El Paso S Mainline fetched $2.90, 15 cents higher. Gas at Malin added 7 cents to $2.79 and gas at the PG&E Citygate tacked on 6 cents to $3.38.

Forecasters see a warming east near term. "A warm pattern is anticipated across the eastern half with aboves focused in particular across the south-central US and to a lesser extent toward the East," said MDA Weather Services in its morning six- to 10-day report to clients. "There is model disagreement regarding the handling of a disturbance over central Canada. The favored Euro shows a more pronounced trough allowing for some moderating across the Midwest early, while the GFS and Canadian keep the disturbance weaker and further north and are subsequently warmer overall.

"There is a risk as per the Euro Op that greater warming could take place mid/late period as this disturbance departs," MDA said.

The Desk in its Early View storage survey said the average of a sample of 12 traders was for a 80 Bcf build, well above last year's 58 Bcf build and a five-year average of 63 Bcf. The injection range on the survey was 51 Bcf to 93 Bcf.

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