Cash prices eased a penny on average Monday, with modest gains in the Midwest unable to offset declines in the Northeast and East. Major market centers were mixed. Futures prices were pounded lower by forecasts of warmer temperatures in the nation’s midsection, a stark contrast to last week’s outlooks calling for a cooler-than-normal regime. At the close May had fallen 14.1 cents to $4.267 and June was lower by 13.9 cents to $4.298. May crude oil expired at $88.76/bbl, down 75 cents.

At Northeast points temperatures were forecast to be chilly Tuesday, but warm up Wednesday. “Boston’s high is expected to be 46 Tuesday with a low of 42, but by Wednesday it is supposed to be 61,” said a Northeast marketer. “We’ll see prices come off for Wednesday, and after that we’ll get into May with sunshine and all that good stuff.” He added that with nuclear generation starting to come back on line, it was beginning to put pressure on forward pricing and basis also.

According to the NGI NRC Power Reactor Status Report, there are 35 nuclear plants’ operating at less than full capacity. The generation from those facilities represents a loss of 25,672 MW out of total U.S. capacity of 98,564 MW generated from 104 facilities. On Friday 27,673 MW was offline.

“The Algonquin Henry forward basis for next month is 43 cents, and that is up a bit from normal,” the marketer said. “Normal used to be in the 20-cent range, but there is a new normal in town. Power demand seems to have lifted that figure.”

Power prices in the East and Northeast weakened. IntercontinentalExchange reported that next-day peak power at the New England Power Pool’s Massachusetts Hub fell $4.75 to $48.25/MWh, and at PJM West, next-day power eased 68 cents to $47.94/MWh.

At the Algonquin Citygates next-day deliveries fell 5 cents to $5.30, and gas for Tuesday at Iroquois Waddington tumbled 25 cents to $5.09. On Tennessee Zone 6 200 L packages were seen 19 cents lower at $5.13.

On Dominion, gas for Tuesday delivery came in at $4.31, down a penny, and on Tetco M-3 next-day gas was quoted at $4.51, down about 3 cents. Gas destined for New York City on Transco Zone 6 was lower by a about 2 cents to $4.54.

Next-day prices across the Midwest were steady to higher as temperatures were expected to remain below normal. On Alliance, next-day parcels were quoted at $4.50, 2 cents higher and at the Chicago Citygates, gas for Tuesday was seen at $4.46, down a cent. On Northern Natural Ventura, next-day gas came in at $4.43, up 4 cents, and gas at Demarcation was up a cent at $4.43.

Market Hubs were mixed. Gas at the Henry Hub fell 5 cents to $4.33, and deliveries to El Paso Permian were flat at $4.18. At Opal packages were unchanged at $4.17, and at PG&E Citygates next-day deliveries fell 3 cents to $4.36.

Futures traders were perplexed by the day’s decline. “The whole idea of this market was that people wanted to buy this thing,” said a New York floor trader of natural gas. “I’m thinking that $4.25 is now the new support level and we are carving out a new range up to $4.40 and beyond that $4.50.”

The May June spread settled at 3.1 cents, barely changed from Friday. “If today’s move were really bearish, that spread would have widened out,” the trader said.

Weather models over the weekend shifted to warmer. In its Monday morning six- to 10-day outlook WSI Corp. said, “Temperatures are warmer across much of the central and eastern U.S. when compared to Friday’s forecast as a result of a shift in the period in conjunction to the latest model guidance solutions being a bit more aggressive with warmer weather developing over the central U.S.”

Risk managers are looking for a spot to put on a short position depending on the outcome of the winter strip. “It has been our feeling that natural gas is in the process of putting in a major bottom, but we feel the process is going to take quite some time,” said DEVO Capital Management President Mike DeVooght. “We do think that the trade, buy natural gas and sell the complex, has a considerable amount of fundamental merit.

“If we continue to see manufacturing demand pick up, while countries abroad continue to weaken, you could make a case that natural gas will increase in value relative to the U.S. oil markets. This might support the natural gas markets while the positions are being established (open interest in the natural gas market has exploded over the past five to six weeks), but ultimately there is more than adequate supply to meet any uptick in natural gas demand. Ultimately, the long natural gas/short oil trade could work, but it could work because all of the energy markets go lower, but natural gas doesn’t fall as much as the oils.

“If the winter strip [currently $4.66] should approach $5, we will start to establish a light, short position,” DeVooght said in a weekend note to clients.

“Gas prices surged to a 21-month high above $4.400 last week as lingering cold weather and a tightening supply outlook helped boost prices more than 40% in the past couple months,” said Tradition Energy’s Addison Armstrong in a note. “But the arrival of mild spring temperatures and the return to service of idled nuclear power plants should provide resistance to market rallies.”

John Sodergreen, editor of Energy Metro Desk, reported that his “Early Bird Survey” of the week’s natural gas inventory report shows an average 33 Bcf build expected, behind both last year and five-year averages. His final estimate is expected Wednesday.

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