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Surging Cash Quotes on Cold Can't Get Futures Off Dead Center

Next-day overall physical gas prices on average jumped approximately 29 cents in Monday's trading. Back out the multi-dollar gains seen at some New England points hit by forecasts of cold weather and surging power demand and the figure settles in at a 15 cent advance.

Gains were deep and widespread with New England and the East chalking up the greatest moves, but major market centers saw gains of a dime to 20 cents. Futures were not moved by the strong cash market advance. December rose 1.5 cents to $3.574 and January added 0.7 cent to $3.623. December crude oil advance 54 cents to $95.14/bbl.

Boston and New England were expected to see a blast of late fall cold and some snow. According to Kristina Pydynowski, senior AccuWeather.com meteorologist "Much colder air and even snowflakes are on the way for Boston. Arctic air is set to blast in on Tuesday and hold highs to near 44 degrees. The hours before sunrise Tuesday could actually prove to be warmer than the afternoon. Brisk winds ushering in the cold will create even lower wind chill temperatures on Tuesday.

"Tuesday night, temperatures in downtown Boston will drop into the 20s for the first time this fall. On Wednesday, temperatures will fail to climb out of the lower 40s. While escaping its first snowstorm of the season, part of the Boston area could have wet snowflakes mix in with the rain Tuesday morning as the arctic air arrives."

This system is fast and furious. "As fast as the arctic air invades the United States, temperatures will quickly rebound later in the week."

AccuWeather.com forecast that the high Monday in Boston would drop to 43 on Tuesday before falling to 39 on Wednesday. The normal high in Boston this time of year is 53. Hartford, CT's Monday high of 51 was expected to slide to 42 Tuesday before easing further to 40 on Wednesday. The seasonal high in Hartford is 54. In Providence, RI the high on Monday was seen dropping to 41 on Tuesday and 39 on Wednesday. The normal high for Providence in mid-November is 55.

Surging demand for power also provided a firm footing for power generators to buy gas. New England ISO forecast that Monday's peak load would reach 16,970 MW Monday, 17,850 MW Tuesday and 18,030 MW Wednesday.

Next-day peak power at eastern locations vaulted higher. IntercontinentalExchange reported that Tuesday peak power at the New England Power Pool's Massachusetts Hub jumped $24.95 to $64.83/MWh and peak power at the New York ISO Zone A (western New York) market point rose $22.44 to $65.00/MWh. Peak Power at the PJM West market point gained $8.24 to $47.46/MWh.

Gas for delivery Tuesday at the Algonquin Citygates rose $4.41 to average $8.37 and deliveries into Iroquois Waddington added 44 cents to $4.19. At Tennessee Zone 6 200 L next-day packages skyrocketed $4.31 to $8.22.

To the south gains were more subdued. Deliveries on Dominion rose 14 cents to $3.30 and on Tetco M-3 Tuesday packages came in at $3.68, up 36 cents and gas bound for New York City on Transco Zone 6 gained 46 cents to $3.81.

According to Pydynowski the Midwest was not about to escape the wintry blast. "Accumulating snow and the risk of slippery travel will accompany an arctic blast into Chicago early this week. While cooler air settled over Chicagoland on Sunday, it will pale in comparison to the arctic blast set to grip the city through Tuesday."

"After starting the day in the 40s Monday, temperatures plunged into the 30s during the afternoon as the arctic air arrived. Brisk winds will resulted in even lower wind chill temperatures. Tuesday, however, will shape up to be Chicago's coldest day since March with temperatures struggling to climb out of the lower 30s during the day and dropping down to 20 degrees at night."

Tuesday gas on Alliance added 11 cents to $3.76 and on Michcon next-day parcels were seen at $3.72, up 7 cents. On Consumers gas changed hands at $3.75, up 14 cents.

Other trading points also rose. At the Chicago Citygates next-day gas was at $3.76, up 10 cents and at the Henry Hub Tuesday deliveries rose 8 cents to $3.62. At El Paso Permian gas was seen at $3.56, up 20 cents and at the SoCal Border next-day gas came in at $3.73, up 12 cents.

Futures traders noted that "In the scheme of Veterans Day trading volume was not bad at all. $3.60 is the [resistance] number on the upside and $3.50 the [support] number on the downside. Today was not a big move no matter how you look at it," said a New York floor trader.

12ZModelRuns.com in its noon update showed temperatures in the 10 to 13 day window 10 to 20 degrees warmer for the Great Lakes and Ohio Valley.

Longer term, though, weather uncertainty looks to be the primary market driver. In Friday's trading traders said they were anticipating the arrival of cold air next week. "I know its supposed to be cold here next week with highs of 45 and 46, but I don't know if it is sustainable," said a New York floor trader. "I'm looking for a trading range between $3.50 and $3.70, but there are a lot of traders sitting on the sidelines waiting for sustained cold weather. I'm not sure that's going to happen."

Recent forecasts haven't made things any clearer as the weather outlook became less certain over the weekend. In its six- to 10-day outlook Commodity Weather Group shows less of a cold incursion from the north and a warming trend in the Southeast. "The cold push for the upcoming week has progressed forward in the forecast well over the weekend," said Matt Rogers, president of the firm. "Temperatures at midweek are expected to rise only into the 40 for the East Coast, after temperatures barely rising above freezing in Chicago tomorrow.

"In the 6-10 day we see some warmer trends across the East ahead of yet another cool push, but there is significant disagreement on the strength and movement of this next round of chill. We remain very cautious, but with low confidence and mid continent risks remaining in the colder direction. Out in the 11-15 day, we see more variability, but with models suggesting another burst of ridging building into Alaska, this keeps risks across the lower 48 weighted in the colder direction.

Market technicians don't see the market going anywhere near term. Analysis of Elliott Wave and Retracement patterns shows "There is a very bullish case for Natgas and a very bearish case. It looks to me that Natgas will continue to congest and thus frustrate both bulls and bears," said Walter Zimmermann of United-ICAP.

He added that earlier studies showed "a decisive break below $3.160 as opening room down to the $1.750 area, [and] a decisive break above $3.840 as opening room up to the $4.500 area. In the meanwhile Natgas is bogged down in congestion."

Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm suggests that trading accounts and end users currently stand aside the market. Those with exposure to lower prices should hold the balance of  a short November-March strip established earlier at $4.50 to $4.60.

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