Physical natural gas for Tuesday delivery posted stout gains in Monday's trading in spite of moderating weather forecasts. Most Northeast points saw double digit gains, while Marcellus points saw prices plunge below $1 on capacity constraints.
Futures prices managed to make only incremental gains after a strong open. At the close, September was 0.3 cent higher at $3.965 and October was up 0.8 cent to $3.988. September crude oil gained 43 cents to $98.08/bbl.
Next-day prices plummeted in the Marcellus region as constraints made gas movement difficult. Tennessee Gas Pipeline (TGP) reported no operational capacity available between stations 201 and 204 in southern Ohio and western West Virginia. TGP reported on its website 1,050,000 Dth of operational capacity, but total (over) scheduled capacity of 1,244,233 Dth, or no available capacity.
Prices in the Marcellus reacted quickly. Deliveries to Transco Leidy plummeted 29 cents to $1.75, but at Tennessee Zone 4 Marcellus next-day gas traded as low as 15 cents before ending the day at 60 cents, or down a whopping $1.37.
Prices at other eastern and Northeast points gained as cuts in transportation trumped mild weather. "The market is still pretty weak as there is more than enough gas. Dawn is trading at $4 and Algonquin is only $3. Prices are up today because of some cuts at Mahwah," said an eastern marketer.
"When you think of prices going up 20 to 30 cents and gas is cut a half Bcf, that's not a big deal," he said. "That should end by the end of the week. It's short lived."
TGP reported that operationally at its interconnect with Algonquin Gas Transmission at Mahwah total operating capacity was 934,146 Dth and scheduled capacity was 933,653 Dth, leaving just 493 Dth available.
Gas for delivery at Algonquin Citygates gained 36 cents to $2.99 and deliveries to Iroquois Waddington added 22 cents to average $3.82. Gas on Tennessee Zone 6 200 L rose 29 cents to $2.98.
Gas headed for New York City on Transco Zone 6 added 45 cents to $2.91 and deliveries to Tetco M-3 rose 44 cents to $2.82.
Prices are likely to remain in flux for the next couple of days as transportation curtailments duel with mild weather for market control.
Temperatures in New York and Philadelphia are expected to moderately rise, but still stay at seasonal norms. Wunderground.com reported that Monday's high in New York City of 85 was expected to drop to 76 Tuesday and reach 82 Wednesday. The normal high in New York City for mid-August is 83. Philadelphia's high Monday of 91 was seen sliding to 75 Tuesday and climbing back to 83 Wednesday, the seasonal norm.
Producing regions posted some healthy gains. Gas for Tuesday delivery on Columbia Gulf Mainline rose 3 cents to average $3.88 while deliveries to the Henry Hub added 4 cents as well to $3.95. Gas at Katy gained 8 cents to $4.04 and parcels at the Houston Ship Channel gained 9 cents to $4.05.
Futures traders liked what they saw as a strong close even though the market opened 4 cents higher. "I think the market is poised to move higher," said a New York floor trader. "If traders [Tuesday] can get it over $3.98, I think they will move it over $4 and test the $4.08 to $4.12 area."
MDA Weather Services, in its morning six- to 10-day forecast, said the period "comes with mixed changes [Monday] and a marginally anomalous outlook as it features a transition in the pattern away from the cool-dominated look to a hotter-than-normal one by late in the period. The first half of period shifts cooler Midwest to East under lingering high pressure and lower than normal heights.
"But by late in the period a series of [load-killing] storm systems move eastward, breaking down high pressure as upper-level ridging grows and leading to a warm-up. Confidence is held down today due to uncertainty with the timing and intensity of this transition."
The firm said the first half of the period "carries cooler risks in the East to South while the second half carries hotter risks." It also said the central United States could become hotter within an active weather pattern.
In its Monday morning 20-day outlook, WeatherBELL Analytics forecasts a greater-than-normal accumulation of cooling degree days (CDD). For the next 15 days, the U.S. is expected to see 64.7 CDD, more than last year's 56.6 CDD and an average of 49.8 CDDs, according to WeatherBELL figures.
Mike DeVooght of DEVO Capital said both trading accounts and end-users should stand aside. For those with exposure to lower prices, he said to hold what little is left of a short April-October summer strip initially established at $4.20 to $4.30 and also hold the remainder of a second summer strip established at $4.50. The summer strip settled Friday at $3.971.
Market technicians see the market needing to move higher to demonstrate a seasonal low is in place. "With natgas recouping all of Thursday's losses, the bulls are poised to start the week with a run at $3.998 (0.236)," said Brian LaRose of United ICAP in closing comments Friday. "Can they power through? If so, this will be our first piece of hard evidence in support of bottoming action. The next hurdle to clear in this case, a wide band of resistance stretching from $4.259 to $4.442. Bulls need to clear this zone to confirm a seasonal low is in place."
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile expects the market to test last week's value area at $3.967 to $3.879 before moving on and testing a second value area at $4.159 to $4.037. He added that the market will "maybe test" $4.422 to $4.326 "if time permits." He said technical buying is making an appearance.