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NatGas Cash, Futures Diverge As Traders Mull Minimal Heating Load

After a Friday drubbing of spot natural gas prices for weekend and Monday delivery, the market recovered in Tuesday trading as eastern prices got a boost from a firm next-day power price sector.

Gains in Appalachia and the Northeast easily outdistanced flat pricing in the Midwest and Midcontinent and weak prices in the Rockies and California. The NGI National Spot Gas Average gained 8 cents to $2.58.

Futures prices couldn't get out of their own way as near-term prospects of record low heating load proved enough to send prices packing. At the close November had lost 3.0 cents to $2.833 and December had fallen 2.8 cents to $3.018. November crude oil rose 29 cents to $49.58/bbl.

A firm next-day power market was enough to give New England and Mid-Atlantic next-day gas a boost. Intercontinental Exchange reported that on-peak power for Tuesday delivery at the ISO New England's Massachusetts Hub gained $9.72 to $55.75/MWh and on-peak power at the PJM West terminal added $2.63 to $50.16/MWh. Next-day peak power at the Indiana Hub advanced $4.33 to $41.25/MWh.

Gas at the Algonquin Citygate gained 43 cents to $3.11 and gas on Tennessee Zone 6 200 L jumped 53 cents to $3.09. Gas priced on Tetco M-3 Delivery added 37 cents to $1.28, and gas bound for New York City on Transco Zone 6 rose 32 cents to $2.89.

Gas in the Midwest was mixed. Deliveries to the Chicago Citygate rose a penny to $2.71 and gas at the Henry Hub was quoted 6 cents lower at $2.86. Gas on El Paso Permian fell 7 cents to $2.34, and parcels at Northern Natural Demarcation changed hands flat at $2.62.

Both Kern River and Kern Delivery came in 4 cents lower at $2.48 and $2.60, respectively, and gas priced at the PG&E Citygate fell 4 cents to $3.05. Gas at the SoCal Citygate added 14 cents to $3.05.

Traders versed in Market Profile see the market currently testing support at a value area, but if that doesn't hold prices may be set to erode further. "We are looking for the market to test the area at $2.834, and below that I don't see any value areas," said a trader with FCStone Latin America in Miami. "It was an interesting day today and probably had something to do with some of the weather reports."

There were plenty of weather developments to go around.

The remnants of Nate, a Category One storm, soaked the Mid-Atlantic and Northeast after making two landfallson the Gulf Coast Saturday night and Sunday morning.

Nate, which traversed a rich natural gas and oil production area of the Gulf of Mexico before coming ashore, through midday Monday still was forcing the shut-in of 64.78%, or 2.086 Bcf/d of natural gas, based on operator reports submitted to the Bureau of Safety and Environmental Enforcement.

Shut-in production was more than offset by prospects of minimal seasonal heating load.

"The very warm pattern continued on the models over the weekend with just a little bit of noise here and there," said Matt Rogers, president of Commodity Weather Group in a morning report to clients.

"October 2017 is tracking toward record low heating degree days [HDD] (trying to replace the 1963 benchmark record) and record high cooling degree days [CDD] (besting 2007's record). [Monday's] forecast is mostly a heating demand loss, but we did find some transient weaker warming in the Midcontinent in the six- to 10-day that added a few heating degree days back into the forecast and combined with increased cooling degree days (especially South) for a total degree day gain this morning."

In its Monday morning report the National Weather Service reported for the week ended Oct. 14 New England was expected to see just 25 HDDs or 70 less than normal. CDDs were estimated at 13 or 13 above normal. The Mid-Atlantic was forecast to experience 10 HDDs or 69 under its norm, and 19 CDDs or 17 above its typical seasonal tally. The greater Midwest was predicted to "enjoy" just 27 HDDs or 55 less than normal while CDDs were seen at seven, or five greater than normal.

Meanwhile, hurricane watchers on Monday were keeping an eye on the Atlantic, where Tropical Storm Ophelia was packing 45 mph winds. The National Hurricane Center said Ophelia was as yet no threat to land, about 845 miles west of the Azores.

The storm was moving toward the north-northeast near 5 mph, with a motion toward the east-northeast and east forecast later Monday night, followed by a turn toward the east-southeast on Tuesday.

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