Natural gas prices for Friday physical delivery on average fell 9 cents in Thursday's trading. It was a tale of two coasts as West Coast points suffered hefty double-digit losses within a weak power environment and a nominal weather outlook. East Coast locations were mixed with prices a few pennies on either side of unchanged.
Futures traders saw no market impact from the absence of weekly inventory data, and at the close November had eased 1.2 cents to $3.757 and December was lower by 1.9 cents to $3.886. November crude oil dropped $1.62 to $100.67/bbl.
California and West Coast prices tumbled amidst a lackluster weather outlook and soft power prices and tempered demand. Forecasters called for temperatures in California to range from normal to slightly above normal for the season. AccuWeather.com predicted Thursday's high of 81 in Los Angeles would rise to 82 Friday and 86 by Saturday. The seasonal high in Los Angeles is 78. Sacramento's 79 degree high Thursday was anticipated to hold steady Friday before rising to 81 Saturday. The normal high in Sacramento is 78. San Francisco's high on Thursday of 69 was seen easing to 68 Friday before reaching 70 on Saturday. The typical mid-October high in San Francisco is 70.
Forecasters were calling for temperate conditions in Northern California. "Sunny and dry weather will continue in San Francisco for the second half of the week. Daytime temperatures will be in the low 70s with light north to north-northwest winds," said AccuWeather.com's Mark Leberfinger. "Evening lows are expected to range from the upper 40s to lower 50s with skies remaining clear. No rain is in the forecast through at least Saturday, and a similar weather pattern is forecast to unfold next week as well, keeping the region dry and clear."
Both power demand and power prices in California and surrounding points fell. The California Independent System Operator forecast that Thursday's peak demand of 30,709 MW would fall to 30,017 MW Friday.
IntercontinentalExchange reported that Friday-Saturday peak power at NP-15 fell $1.75 to $41.08/MWh and Friday-Saturday peak power at SP-15 shed $2.99 to $41.83/MWh. At Four Corners, peak power for Friday and Saturday shed $1.14 to $33.86/MWh and peak deliveries to Palo Verde dropped $1.64 to $34.91/MWh.
Quotes for Friday gas at Malin fell 15 cents to $3.80, and deliveries to PG&E Citygates slid 14 cents to $4.01. At SoCal Citygates, gas was quoted at $3.97, down 14 cents, and at SoCal Border next-day gas came in at $3.84, down 15 cents. Packages on El Paso S Mainline fell 14 cents also to $3.85.
By contrast, East Coast locations were relatively unscathed. Deliveries to the Algonquin Citygates were up a penny to $3.88, and gas into Iroquois Waddington fell a nickel to $3.93. On Tennessee Zone 6 200 L, Friday gas changed hands at $3.89, up three cents.
On Dominion, next-day gas came in at $3.53, a penny lower, and on Tetco M-3 next-day gas added 3 cents to $3.76. Gas headed for New York City on Transco Zone 6 fell 6 cents to $3.80.
Futures traders were watching closely as the normal release time for Energy Information Administration (EIA) storage data approached. "We were looking to see if the market would move around the 10:30 mark to see if someone had some kind of inkling about anything, but it didn't. It stayed exactly where it was," said a New York floor trader.
The trader said volume "was a little less than normal. We are currently [10:30 a.m. EDT] about 70,000 contracts. On a typical report day we would be seeing these kinds of numbers, maybe 10,000 either way. Most of the time the market will make a move in either direction and within a 20 minute time span it settles in to either side of a penny up or down. This market hasn't gone anywhere."
Storage-watchers who were denied their fix Thursday will get an extra treat next week. With the U.S. government back to work, the EIA reported Thursday afternoon that its natural gas storage report for the week ending Oct. 11 will be released at 10:30 a.m. EDT on Tuesday, Oct. 22, with the report for the week ending Oct. 18 coming two days later at its regularly scheduled time of 10:30 a.m. EDT on Thursday Oct. 24. Whether two reports in one week sparks increased volatility remains to be seen.
Volatility or not, here's where we stand now. Working gas in storage is 3,577 Bcf, 138 Bcf less than at this time last year but 55 Bcf more than the five-year average. Estimates vary, but indications are that storage is on track to come very close if not exceed last year's record build of 3,930 Bcf. For that to happen, 88 Bcf would have to be injected during the four remaining weeks of the traditional injection season ending at the end of the month.
Injections do seem to be on track to exceed the average season ending inventory of 3,776 Bcf. That would require just 50 Bcf over the next four weeks. Often, however, the heating season doesn't get revved up until mid-November thus potentially leaving a few more weeks of injections during the first part of the month.
Estimates for what would have been today's storage report generally centered around a build of 80 Bcf. United ICAP calculated an 80 Bcf increase, as did a Reuters poll of 24 traders and analysts. The Reuters data ranged form 73 Bcf to 91 Bcf. Bentek Energy forecast an increase of 70 Bcf. Last year, 54 Bcf was injected, and the five-year average stands at 75 Bcf.
Weather forecasts for the western United States moderated somewhat overnight. WSI Corp. in its morning 11- to 15-day outlook still showed pervasive below-normal temperatures for the eastern two-thirds of the country with the exception of Florida, but "[Thursday's] forecast has trended warmer over the interior West as models are more aggressive with building heights over the West, focusing the next cold shot over the East.
"Confidence in today's forecast is considered average as the latest medium-range ensemble model guidance solutions remain in good agreement." Risks to the forecast include, "signs...pointing to the relaxation of the pattern across the Midcontinental U.S. late in the period as the ridge over the Northeastern Pacific begins to weaken.
"That being said, there's a chance West Pacific typhoon activity could flip the pattern if models are missing any significant perturbation to the mid-latitude wave guide."
Market technicians following Elliott Wave and retracement analysis see signs of a short-term market top. "[We] have a confirmed peaking pattern on the daily candlestick chart after a test of key resistance," said Brian LaRose, an analyst with United ICAP, following Wednesday's settlement. "However, no sell signal has been generated on the short-term technicals, at least not yet. Suggest keeping a close eye on the short-term technicals overnight. Should a shift in favor of the bears occur, the ratio retracements of the move up from $3.402 will be our first candidates for support."