Physical natural gas for weekend and Monday delivery was in abundant supply in Friday's trading, and with sellers outnumbering buyers and a weak settlement of the November futures contract, prices tumbled.
Heaviest losses were seen in California, the Northeast, and Appalachia, and more modest setbacks of about a dime in Texas, Louisiana, the Midwest and Midcontinent resulted in the NGI National Spot Gas Average falling 16 cents to $2.53.
The expired November contract skidded as at first weather forecasts moderated overnight, but with a lack of traders wishing to take delivery, November settled down 13.8 cents at $2.752 and December dropped 8.7 cents to $2.964. December crude oil jumped $1.26 to $53.90/bbl.
The day's big mover was the SoCal Citygate tumbling from its recent highs as temperatures were seen below seasonal norms by Monday and power prices moderated. AccuWeather.com forecast the high in Los Angeles Friday of 88 would hold Saturday before dropping to 74 by Monday, 3 degrees below normal. San Bernardino, CA was anticipated to see its Friday high of 94 hold for Saturday before falling to 76 Monday, 5 degrees below normal.
Gas at the SoCal Citygate for weekend and Monday delivery fell $1.72 to $2.79 and gas priced at the SoCal Border Average shed 53 cents to $2.59. Deliveries to El Paso S Mainline skidded $1.01 to $2.58, and parcels at the PG&E Citygate fell 11 cents to $3.06.
Intercontinental Exchange reported on-peak Monday power at SP-15 shed $4.25 to $32.75/MWh and power at COB [California Oregon Border] fell $1.88 to $26.30/MWh.
Eastern points had some hefty losses of their own. Gas at the Algonquin Citygate was quoted 19 cents lower at $2.85 and gas on Dominion South fell 37 cents to 92 cents. Gas on Tetco M-3 Delivery changed hands 20 cents lower at $1.18 and gas on its way to New York City via Transco Zone 6 fell 42 cents to $2.29.
Chicago Citygate deliveries gave up 8 cents to $2.85 and gas at the Henry Hub lost 11 cents to $2.78. Quotes for gas at Transco Zone 4 slid 6 cents to $2.74 and gas on Panhandle Eastern dropped 9 cents to $2.56.
Although a significant shift in weather patterns occurred in the overnight model runs, traders were reluctant to ascribe the day's drop in November futures solely to any mega-shift in fundamentals. "Usually at expiration it's a question of who wants to take delivery," said Tom Saal, vice president at FCStone Latin America. "It's more of a liquidation process relative to contract expiration with people offsetting positions ahead of expiration.
"Last week we had a little bit of a rally, so maybe that was the shorts getting out a little early and the longs sticking around a little too long. Expiration exaggerates things and you really can't draw the conclusions you might otherwise if it were not expiration."
There is no denying that market bulls suffered a significant setback with the overnight weather model runs.
"[Friday's] six-to-10 day period forecast is notably warmer than yesterday's forecast over the eastern two thirds of the” continental United States (CONUS), “aided by the day shift. The Northwest and No. Rockies are colder," said WSI Corp. in its morning report to clients. "CONUS” gas-weighted heating degree days “are -9.3 to 61.1, which are now 12.2 below average.
"Even with the warmer changes, there is a warmer risk across the south-central and eastern U.S., especially day six across the south-central states. The Northwest, No.Rockies and western Canada could run even colder."
Traders see the breach of $3 in the now spot December contract as auguring further weakness. "As we shift focus to the December contract, today's violation of expected key support at the $3.00 mark strongly favors some downside price follow through," said Jim Ritterbusch of Ritterbusch and Associates in comments Friday.
"While sub $3.00 levels would appear attractive given weather uncertainties during the coming month, we will await weekend temperature updates before considering a buy recommendation. The storage deficit, albeit small, would appear capable of driving a sizable price advance once the first sustainable cold weather forecast shows up on the horizon. But while we see more upside than downside price risk from current levels, we will defer on a purchase suggestion for now."