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New England Drops Mask Overall Market Strength; December Adds 2 Cents

Physical natural gas for delivery Tuesday on average fell approximately 7 cents in Monday's trading. However, if Algonquin Citygate's nearly $8 loss and Tennessee's Zone 6 200 L $6-plus loss are factored out, the overall market change is a gain of about 6 cents.

The East was mixed, but points in the Midwest registered robust gains. Major market centers in the Gulf, Midcontinent, and Texas were all solid gainers. At the close of futures trading December added 2.1 cents to $3.789 and January rose 3.1 cents to $3.842. January crude oil fell 75 cents to $94.09/bbl.

Weather forecasts along the Eastern Seaboard called for abrupt warming by mid-week. Forecaster Wunderground.com predicted that the Monday high in Boston of 33 would reach 45 by Tuesday and a spring-like 64 on Wednesday. The normal high in Boston is 48. New York City's 36 high reading Monday was anticipated to rise to 48 Tuesday and jump to 64 on Wednesday. The normal high in New York is 50. Philadelphia's Monday high of 39 was seen advancing to 45 on Tuesday before making it to 68 on Wednesday. The seasonal high in Philadelphia is 50.

The National Weather Service (NWS) in southeast Massachusetts said "high pressure will generally remain in control through [Tuesday]..although a weak front could bring some light snow showers to the northwest during early tomorrow morning. Low pressure moving out of the Golf of Mexico will bring a period of  heavy rain...strong winds...and warm temperatures for Tuesday night into Wednesday night. After a brief warm- up...temperatures will chill below normal for the latter part of the week."

With moderating temperatures power load was forecast to ease. The New England Independent System Operator (NE-ISO) predicted Monday's peak load of 19,550 MW would subside to 18,850 MW Tuesday and 17,540 MW by Wednesday.

With declining loads and a soft temperature environment power generators saw no need to bid for incremental supplies of natural gas as next-day power prices tumbled. IntercontinentalExchange reported peak power for Tuesday delivery at the NE-ISO's Massachusetts Hub tumbled $51.18 to $57.85/MWh and peak power into the PJM West terminal dropped $10.51 to $42.50/MWh.

Quotes at the Algonquin Citygates plunged $7.92 to $6.09 and at Iroquois Waddington gas was seen at $4.21, down $1.93. Deliveries on Tennessee Zone 6 200 L dropped a gut-wrenching $6.31 to $5.94.

Deliveries on Dominion were up by 8 cents to $3.52 and gas on Transco-Leidy added 13 cents to $3.31. Packages on Tetco M-3 fell 13 cents to $3.88 and gas destined for New York City on Transco Zone 6 skidded $1.47 to $4.06.

In contrast to the eastern warm-up portions of the Midwest and Great Lakes were expected to remain frigid. Wunderground.com predicted the high in Chicago Monday of 37 would slide to 36 Tuesday and hold through Wednesday. The normal high in Chicago is 43. Minneapolis' 39 high Monday was anticipated to drop to 21 Tuesday before rising to 27 Wednesday. The seasonal high in Minneapolis for late November is 36.

The NWS in suburban Chicago said their "main forecast concerns are with ending of light snow across the region this evening [Monday]...then a push of colder air with the potential for flurries/light snow showers late Tuesday and Tuesday night. Accumulating lake effect snow possible for parts of northwest and North Central Indiana Tuesday night through Wednesday...with the potential for several inches of accumulation from Porter County eastward."

Gas was seen at the Chicago Citygates for Tuesday delivery up 18 cents to $4.07 and on Alliance Tuesday parcels came in at $4.00, up 12 cents. At Northern Natural Ventura gas changed hands at $4.13, up 28 cents, and at Demarcation Tuesday gas was $4.17, up 33 cents. On Panhandle Tuesday deliveries rose 21 cents to $3.74.

Major Hubs were also firm. The Henry Hub rose 8 cents to $3.85 and gas on NGPL TX OK rose 13 cents to $3.84. Deliveries to Opal gained 17 cents to $3.86, and gas on El Paso Permian added 30 cents to $4.00.

Futures traders are optimistic. "It think we'll possibly come in 3 to 4 cents higher Tuesday and then by the time the [storage] number comes out on Wednesday trade up to $3.90," said a New York floor trader.

Weather forecasts moderated over the weekend. Commodity Weather Group in its morning six- to 10-day outlook sees a significant contraction in below and much below normal temperatures previously forecast for the Northeast, East, Southeast Ohio Valley and Southern Plains. "While the various models continue to agree that ridging in the North Pacific continues to pulse into Alaska and the Yukon to support significant cold air mass development, the modeling continues to disagree on transport details into the Lower 48.

"[Sunday] afternoon's 12z European ensemble cycle started to speed it up a bit toward the South and East by the 11-15 day, but the overnight trends retreated back to slower timing. Slower timing would enable some additional transient warming to lift north through the Midwest and into the East, especially for the six-10 day range. The details on the 11-15 day are still tough, but the main concern is that the air masses in Western Canada are strong enough to still come south and east stronger than modeled (as we have seen a few times here in November)," said Matt Rogers, president of the company.

According to figures from a Rocky Mountain producer, "U.S. demand is set to surge...as an arctic blast of cold weather triggers large gains in [residential and commercial] demand. U.S. demand will surpass the previous high of 87 Bcf/d for current winter set last week and is expected to average near 94 Bcf/d. The colder-than-normal temperatures are expected to persist throughout [the] week with U.S. demand levels consistently above 92 Bcf/d."

Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile looks for the market to test last week's value area between $3.730 and $3.612. Saal is not specific in his timing, but typically value areas are tested during the next time period (week).

Traders on Monday were also dealing with the news that the CME Group has made its second energy futures settlement revision in less than a month (see related story). The exchange told NGI Monday that due to a "technical issue" fractional changes have been made to the contract expiration prices of 10 Nymex energy products and related instruments settled between May and October 2013.

The two natural gas products affected were the May and September 2013 Henry Hub Natural Gas Futures contracts. The price of May futures, which expired April 26, was revised downward from $4.152/MMBtu to $4.151/MMBtu, while the September contract, which expired August 28, was similarly revised down from $3.567/MMBtu to $3.566/MMBtu.

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