Daily GPI / NGI All News Access

Cash, Futures Both Dance Lower; September Off By 3 Cents

Physical natural gas prices nationally on Monday for Tuesday delivery meandered lower by a couple of pennies, with the East mixed and Northeast posting modest gains and most other points falling a couple of pennies or more. Northeast temperatures were expected to stay below seasonal norms, and traders saw the gains as within a normal margin of error. At the close, September natural gas had fallen 2.8 cents to $3.319 and October was off 2.9 cents to $3.346. September crude oil slid 38 cents to $106.56/bbl.

A Northeast marketer wasn't surprised that next-day gas prices at eastern points were up modestly on the day, and called the gains nominal relative to price changes typically observed at eastern and northeast locations.

"Tennessee is starting some work around Station 245 which is affecting flows from the east to the Midwest. It's going to affect about 45,000 Dt. There was a market area to supply area that was cut. There is more gas in the market area than there is demand right now, and we'll probably see a lot more of this in September and October. The gas will displace that coming up from the Gulf."

"As long as there is heat in Texas, there is hope for Gulf gas. Take that away and your are really going to get some displacement," he said.

Temperatures throughout New England were expected to be below normal. AccuWeather.com predicted that the high Monday in Boston of 77 would rise to 79 by Tuesday and hold into Wednesday. The normal high in Boston this time of year is 81. Hartford CT's Monday high of 78 was forecast to rise to 79 Tuesday and slip to 78 on Wednesday. The seasonal high in Hartford is 84. Providence, RI was also forecast to see a high Monday of 78, but by Tuesday it was seen dropping to 77 before rising to 78 Wednesday. The normal high in Providence is 83.

Next-day power prices were forecast to ease slightly. IntercontinentalExchange reported that peak next-day power at the New England Power Pool's Massachusetts Hub fell $3.62 to $33.13MWh and power into the New York Independent System Operator's Zone A (western New York) market area fell $1.80 to $32.45MWh. Next-day peak power into PJM West fell 9 cents to $34.57MWh.

Gas for delivery to the Algonquin Citygates Tuesday was up about a cent at $3.24 and deliveries to Iroquois Waddington fell 6 cents to $3.76. On Tennessee Zone 6 200 L gas was quoted at $3.37, up 8 cents.

On Dominion, packages for Tuesday were seen at $2.90, up about 6 cents and on Tetco M-3 gas came in at $3.18, up 8 cents. Gas bound for New York City on Transco Zone 6 gained about 11 cents to $3.33.

Other market centers were also lower. At the Chicago Citygates Tuesday gas changed hands at $3.40, down 3 cents and at the Henry Hub gas was quoted at $3.33, down 6 cents. El Paso Permian packages were seen at $3.26, down 3 cents and at the SoCal Citygates Tuesday deliveries slid 4 cents to $3.57.

Futures traders, however, see underlying bullish indicators in the market. Mike DeVooght, president of DEVO Capital, said in a weekend note "Favorable manufacturing, construction and industrial numbers this past month should help increase industrial demand." "This could prove to be a bullish factor for natural gas in the coming months."

"We are at current technical support levels but believe natural gas is still weak. We would normally be looking at selling some put premium here but will hold off for the time being until we see some signs of strength in the gas market. Continue to hold current positions."

Those positions for trading accounts consist of a short September position initiated with a short June trade at $4.35. He suggests risking 25 cents on the trade. End-users are counseled to stand aside, and producers should hold the remainder of what was initially a short July-October strip from $3.75 to $3.95 and a short November-March strip from $4.50 to $4.60.

Weather forecasts continue with an ongoing cool pattern in the six- to 10-day period. Commodity Weather Group in its Monday morning report shows a broad ridge of below-normal temperatures prevailing from North Dakota to Arkansas to Virginia and New England. A fairway of above-normal temperatures is expected from Washington to South Texas.

"The prevailing pattern signature held together over the weekend with significant blocking in northern Canada and below-normal (cool) heights over the Midwest and East in response," said Matt Rogers, president of the firm. "We do have volatility to track in the Central to Eastern U.S. with modest warm-ups ahead of cool fronts, but they pale in comparison to earlier season events and the intensity of the cool pushes. Suppressed ridging south and west of the cool trough is offering some stronger heat to Texas and the interior West at times.

"Texas heat still looks to be strongest this week with 103-104 F peak temperatures in Dallas and upper 90s to near 100F in Houston, making this the hottest workweek of the summer so far. Next week may lean [toward] heat but does not appear to rival this one. The Tropics are remarkably quiet as the models reach beyond mid-month."

 Addison Armstrong of Tradition Energy said, "Gas prices have now plunged more than 50 cents, or 13%, in less than three weeks of trading as mild weather, limited cooling demands and near-record production levels of gas drive the market down to price levels not seen since the end of February."

Recent Articles by NGI Staff Reports

Comments powered by Disqus