Daily GPI / Markets / NGI All News Access / NGI Data

Cash Market Limps Into Weekend; Futures Tumble

Physical gas for delivery Saturday through Monday fell in Friday's trading, seemingly synchronized with double-digit losses on the screen, and marked three consecutive days of lower quotes overall, according to NGI data.

Not one market point registered a gain. Hardest hit was the Northeast, with double-digit losses, but the Mid-Atlantic was right behind with hefty setbacks of its own. The greatest losses were seen in market zones, and producing zones were generally off by about a nickel. Overall, the market lost 9 cents.

Futures had problems of their own. September skidded 13.0 cents to $3.776, and October was off 12.3 cents to $3.807. September crude oil gained $1.77 to $97.35/bbl.

Near-term weather trends struggled just to make seasonal norms. Forecaster Wunderground.com said Friday's high in New York of 73 degrees would rise to 82 Saturday before inching up to 83 Monday, the seasonal high. In Philadelphia, Friday's 81 maximum was forecast to make it to 83 Saturday and 84 by Monday. The normal mid-August high in Philadelphia is 83. Washington, DC, was anticipated to see its Friday high of 80 jump to 86 Saturday and climb to 88 Monday, just one degree above its seasonal norm.

The National Weather Service forecast that low temperatures near term in the Washington, DC, area could drop as low as the 40s as a cool front passes, but "high pressure will build overhead through tonight [Friday] before moving off the coast later Saturday and Sunday. Low pressure will pass through the area Monday into Tuesday, and the cold front associated with the low will stall out near the area during the middle portion of next week."

Gas bound for New York City on Transco Zone 6 fell 23 cents to $2.16, and deliveries to Tetco M-3 were off 21 cents to $2.13.

Points in New England took the biggest hits. Weekend and Monday deliveries at the Algonquin Citygates fell 28 cents to $2.24, and on Iroquois Waddington packages were seen 76 cents lower at $2.66. Gas on Millennium shed 11 cents to $1.96.

Marcellus points continued to weaken as well. Gas on Transco Leidy fell 14 cents to $1.80, and deliveries to Tennessee Zone 4 Marcellus dropped 20 cents to $1.65.

Weaker quotes may come to an end shortly as a leading industry consultant suggested heat next week could increase power burn.

In a report Genscape said, "Power burn is poised to increase next week after having languished for most of this summer. Hotter weather is expected to stretch coast-to-coast. NOAA’s 6-10 outlook is forecasting a strong probability of above-normal temperatures across the East, Texas, Desert Southwest and West Coast."

The firm said it's "Daily S&D outlook model is forecasting total U.S. power demand may reach 30.3 Bcf/d by the middle of next week, with the biggest week-on-week shift expected in the Producing Region. Power burn has struggled this summer as temperatures have been relatively mild. Summer-to-date, U.S. population-weighted temperatures have averaged 71 degrees, one degree below the five-year average. EIA East population-weighted temperatures have run at 67 degrees versus normal of 70.

As a result of the cool temps, Genscape’s “NatGas for Power Burn Estimate” model (which is an aggregate of pipeline nominations, no-notice data, and Genscape’s proprietary plant and transmission data) shows total U.S. summer-to-date power burn averaging 23.16 Bcf/d, 2.07 Bcf/d less than the prior three-year average. The largest drop-off is occurring in the Producing Region, where power burn this summer is averaging 7.38 Bcf/d, a 1.7 Bcf/d decline from the three-year average and 1.24 Bcf/d below the prior five-year average. The West is bucking the overall trend, however. Temperatures there are averaging 69 degrees, two degrees above normal. This has caused power burn to average 4.57 Bcf/d, 0.43 Bcf/d greater than the three-year average and 0.56 Bcf/d above the five-year average."

Consistent with the Genscape outlook, the New England ISO forecasts maximum power load will increase during the week from Monday's 17,580 MW to 18,100 MW by Friday.

Warmer temperatures are up for debate, however. WeatherBELL Analytics in its Friday morning 20-day Energy Outlook said to look for warmer temperatures, "but not hot in the Midwest and Northeast for week two," said meteorologist Joe Bastardi. "Where it's dry, you can fry. Texas is where heat hits and holds over the next 10 days, [and] a new pool of cool reforms from northern Rockies into northern Plains, then spreads southward and eastward." He added that the SOI (Southern Oscillation Index) was "coupling" for ENSO (EL Nino Southern Oscillation).

"My confidence is high this morning as the trough that pushes through days four through seven (in back of the current major trough) does its dirty work with rains through the Midwest and Northeast, chopping apart the latest heat wave rumor. The precipitation chart shows the lack of rain in Texas, where it will fry, but farther north it's wet.”

WeatherBELL forecasts only a nominal increase in cooling requirements over historical averages. It predicts for the next two weeks an accumulation nationally of 159.7 CDD (cooling degree days), below last years 164.6 CDD but just a touch above the 30-year average of 155.9 CDD.

Traders have come to the conclusion that as bullish as Thursday's inventory numbers may seem, underlying market factors point to a rough balance between supply and demand for the moment and a market unlikely to make near-term substantive moves.

"Although this market received a boost from a 78 Bcf storage injection that fell short of average ideas by about 5 Bcf, we viewed bullish reaction as uninspiring, and we see this market evolving into a choppy/near-term trading affair as attention begins to shift toward the shoulder period," said Jim Ritterbusch of Ritterbusch and Associates.

"[Thursday's] reported injection reduced the deficit against five-year averages from about 20% to 19%, and we continue to look for a reduction of about 1% per week through the rest of the injection cycle. This would imply an end-of-season supply peak of about 3.6 Tcf that should be viewed as ample to meet winter needs given the dynamic of record production. On a shorter-term basis, this market's lack of sustained response to a shift in temperature forecasts away from unusually cool trends and toward more normal patterns is suggestive of a balanced market, at least as far as dynamic factors are concerned. The static force of a 19% shortfall against normal levels has been well priced in.

"Furthermore, a shortfall in supply at this time of the year doesn't present a short-term challenge as far as supply availability is concerned. We also continue to monitor a weak physical trade that will likely maintain pressure on the front switch with contango expansion of another 1-2 cents likely prior to expiration. All in all, we have shifted our trading posture from short-term bullish to neutral as we anticipate a trade between about $3.74 and $4.02 when looking across next week."

Recent Articles by Bill Burson

Comments powered by Disqus