Physical natural gas for Tuesday delivery, as well as futures, vaulted higher Monday as forecast warmer temperatures aided and abetted the bullish cause. Physical gains were deep and widespread, with the Northeast being especially strong, while California, the Rockies and West Texas also provided price leadership.
The NGI National Spot Gas Average added 22 cents to $2.80. Futures opened higher, and traders saw the market in a new price regime with the market poised to break through prior technical resistance points.
At the close, October had added 12.2 cents to $3.146, and November was up 11.0 cents to $3.195. October crude oil gained 2 cents to $49.91/bbl.
"Once the market broke through $3.08, that gave it the momentum to trade up against the $3.157," a New York floor trader told NGI. "I think the market has a little more to the upside now that it has made a decision which way it is going to go.
"I think the market was initially rising on short-covering, but now it is new length. Now that the market has shown its direction, I think it will be supported until it runs out of steam."
Weather forecasts were helpful, but buyers of incremental gas for power generation saw their margins squeezed.
"The overnight and mid-day weather data maintained hotter trends for this coming weekend east of the Rockies, although also held on to the idea of a more seasonal pattern with near normal demand setting up the last several days of the month into early October," said Natgasweather.com in a noon update on Monday.
"Specifically, warm high pressure has shifted over the central, southern, and eastern U.S. where highs of 80s and 90s will gain ground this week to drive slightly stronger than normal national demand. Much cooler conditions have arrived over the West, with an even colder system one expected late this week through the weekend, where valley rains and mountain snows are expected, with lows into the 20s and 30s across many areas."
Cardinal rules of seasonality may have been in play.
"It goes back to my long-standing thesis that there is no more dangerous position than to be short natural gas between Labor Day and Thanksgiving,"said United ICAP Vice President Walter Zimmermann. "There is some question of what kind of rally can we get if we are not coming out of a deeply oversold position. Being deeply oversold into a seasonal cycle low gives you the best punch to the upside, but natural gas hasn't been deeply oversold since February.”
Monday, though, “was significant, because if it was just going to keep on congesting, today should never have happened. This is a big issue for the bears to explain this away. I do have a significant cluster of near-term resistance at $3.175 to $3.22 to $3.23, and if that zone can be bettered I think we can start to see it run."
In the physical market, gains were deep and wide.
Gas at the Algonquin Citygate jumped 58 cents to $2.11, and deliveries into New York City on Transco Zone 6 jumped 80 cents to $3.08. Packages on Tetco M-3 Delivery were quoted 29 cents higher at $1.55, and gas on Dominion South rose 26 cents.
Packages at the Chicago Citygate rose 16 cents to $3.00, and gas at the Henry Hub came in 11 cents higher at $3.10. Deliveries to Transco Zone 4 changed hands at $3.10, up 14 cents, and gas on El Paso Permian added 18 cents to $2.65.
In the West, Kern River was seen at $2.74, up 17 cents, and El Paso S Mainline was quoted at $2.88, up 30 cents and deliveries to the PG&E Citygate rose 14 cents to $3.39. SoCal Citygate jumped 36 cents to $3.23.
"It's the screen that pulls up the next-day in general," said a Houston pipeline veteran. "People will look at storage plays between months, especially down in the Gulf at the Henry Hub."
Next-day power prices were of little help to buyers seeking gas for incremental power burns. Intercontinental Exchange reported on-peak power for Tuesday delivery at the ISO New England's Massachusetts Hub rose $3.91 to $28.84/MWh, but deliveries to the PJM West Terminal rose just 38 cents to $36.22/MWh. Next day power on SP-15 fell $1.76 to $30.89/MWh.