Natural gas futures pulled back Tuesday amid some warmer adjustments to an important blast of frigid temperatures expected to arrive over the holiday weekend. The spot market strengthened in large part due to another weather-driven spike in Northeast cash, and the NGI National Spot Gas Average climbed 26 cents to $3.01/MMBtu.
The January contract settled 5.3 cents lower Tuesday at $2.692, while the February contract settled 5.8 cents lower at $2.697.
The market kicked off the trading week hearing forecasts for a cold weather system arriving over the upcoming holiday weekend, which is expected to drop impressively low temperatures through the middle of the country. The potential for a bump in heating demand helped propel January 13.3 cents higher Monday prior to Tuesday's retreat.
"I think the bears still have control here for the moment until we get above that" old support level at $2.75-2.80, Powerhouse President Elaine Levin told NGI. Tuesday “was an inside day. It didn't mean anything...from here we'll have to see how the market feels about the storage numbers Thursday heading into the three-day weekend."
Still, after breaking below a long-standing trading range of around $2.75-3.20, the move lower should have been more definitive, according to Levin.
"Typically the longer you've been in the range, the more dramatic the break should be, so when this thing broke it should have been very hard. It hasn't been," Levin said. "That's one thing that would be disappointing if I sold this breakout...I would say if it's going to continue lower, tick-tock, it better get going. I'd like to see some more enthusiasm for the downside if the bears are going to stay in control."
NatGasWeather.com noted some "not quite as impressively cold" trends in the midday weather data Tuesday.
"At issue is just how much Arctic air gets tapped this coming weekend, and then how aggressively it spreads across the country early next week," the firm said, adding that "the markets are proving very sensitive to slight weather model swings."
Commodity Weather Group President Matt Rogers said midday runs Tuesday from both the American and European weather models had warmer trends in the six- to 10-day period that showed the "widespread cold outbreak" coming in a little weaker.
"It's still coming. The models are vacillating on the intensity and the details, but it's still coming," Rogers told NGI. "...It still looks like the big cold front hits the East Coast by Christmas morning," with temperatures dropping throughout next Monday, he said. "Then we should see temps getting down into the much-below category in the East for the rest of that short work week."
The latest outlook shows colder-than-normal temperatures for the country for the upcoming Energy Information Administration (EIA) storage report weeks ending Dec. 29 and Jan. 5, though the outlook on the report week ending Jan. 12 is less clear, according to Rogers.
As for Thursday's EIA report, predictions point to a withdrawal much larger than the week before and a far cry from the small injection reported two weeks ago.
Stephen Smith Energy Associates is calling for a 175 Bcf draw from U.S. gas stocks for the week ended Dec. 15, based on 16 total degree days more than normal for the period. That's versus a seasonally normal draw of 145 Bcf (based on 2006-2010 norms), the firm said.
PointLogic Energy estimated that EIA would report a 172 Bcf draw for the period. "The significant increase in week-on-week withdrawals comes amid demand gaining nearly 18.5 Bcf/d week-on-week," analysts said in a note to clients. The demand increase was driven by winter weather in "the East region, where total demand increased by just over 7 Bcf/d week-on-week for the EIA storage week."
In the spot market Tuesday, gains in the Northeast and Appalachia stood out amid more muted price action in most other regions.
AccuWeather was calling for temperatures to fall in Boston Wednesday and Thursday, including lows in the 20s, and the average price at Algonquin Citygate doubled, adding $4.95 to finish at $9.74. Tennessee Zone 6 200L jumped $3.52 to average $9.11. Other Northeast points posted less impressive gains. Iroquois Waddington added 14 cents to $3.20, and Transco Zone 6 New York added 27 cents to $3.14.
Algonquin Gas Transmission LLC had issued an operational flow order Dec. 7 because of capacity constraints on its system, and it remained in effect Tuesday.
In Appalachia, most points posted double-digit gains. Dominion South notched a 21 cent increase to $2.36, while Tetco M2 30 Receipt added 21 cents to $2.36. Tetco M3 Delivery added 21 cents to $2.64.
Appalachian producers began what could be a ramp-up in east-to-west flows on the Rover Pipeline Tuesday. Rover's Phase 1B officially entered service Monday after securing Federal Energy Regulatory Commission approval late last week. For Tuesday's gas day, of the newly added receipt points, only the Madison location posted an increase in scheduled volumes, flowing 70,140 MMcf/d, according to NGI's Rover Tracker.
Genscape Inc. said in a note to clients Tuesday that it "did not anticipate flows would increase immediately upon FERC approval, as we reported in our infrastructure alerts, and would instead ramp over multiple days. Total Phase 1 contracts for December are 1.45 Bcf/d versus the actual average flow since Dec. 1 of 515 MMcf/d."
Genscape said Phase 1B of the 3.25 Bcf/d Appalachian takeaway pipeline adds volume commitments from two new shippers -- EQT Corp. and Antero Resources Corp. "Phase 1B adds a total of 950 MMcf/d of reserved capacity to the 525 MMcf/d that has already been subscribed from Phase 1A shippers; 800 MMcf/d from Antero and 150 MMcf/d from EQT," the analytics firm said. "Antero has contracts to supply gas at Seneca, Berne, Clarington-Eureka and/or Madison, while EQT supply is only reserved at Clarington-OVC."
Elsewhere, MDA Weather Services was calling for above normal temperatures Wednesday for cities across the Midwest and the South.
Chicago Citygate tacked on 5 cents to $2.71, with Joliet adding 5 cents to $2.72.
Henry Hub gained 3 cents to $2.74, while Katy added 3 cents to $2.71.
Prices in the Rockies were mixed. Cheyenne Hub added 3 cents to $2.50, while Kern River dropped 7 cents to $2.60.
In California, PG&E Citygate tacked on 3 cents to $2.94, while the constrained SoCal Citygate dropped 9 cents to $5.16.