Physical gas prices for delivery Wednesday jumped on average about 8 cents Tuesday, but traders attributed it to short-term weather developments with little connection to any longer-term fundamental supply-demand shifts.

South Texas natural gas and power prices surged as temperatures were forecast to be well above normal. Gulf points gained, and Northeast points for the most part were stronger. At the close of futures trading May had slipped 3.2 cents to $1.975 and June had retreated 3.3 cents to $2.063. June crude oil gained 44 cents to $103.55/bbl.

Forecasts of hot weather in Texas lifted quotes throughout the region. “We have some heat coming [Wednesday] in South Texas. It is supposed to be 95,” said a Midcontinent marketer. “There’s a lot of demand, but it’s a short-lived situation. People are buying for power generation and things like that.”

Forecaster Wunderground.com predicted that the high in San Antonio Wednesday would reach 93, 11 degrees above normal for this time of year.

Quotes in the Lone Star State added a nickel to as much as a dime. On NGPL S TX next-day gas bounded higher by 10 cents, and the Houston Ship Channel was a little more than a nickel higher. Next-day gas on El Paso Permian and Texas Eastern S TX both rose a nickel or more.

Next-day power vaulted higher as well. ERCOT North On-Peak gained $12.22 to $37.35/MWh and ERCOT W On-Peak surged $12.15 to $34.90.

On top of localized heat in Texas, The Weather Channel issued a warm May-July forecast. “April has been another in a long string of unusually warm months over most of the eastern two-thirds of the U.S. However, as we head toward a new El Nino event, we are expecting increasing chances of below-average temperatures in at least parts of the U.S.,” said meteorologist Todd Crawford. “For May, we are expecting increasing chances of below-normal temperatures in the central U.S., while the eastern U.S. remains warmer than average. Looking beyond May, we are expecting a much different type of pattern than what was observed during the last four summers.

“The combination of an emerging El Nino event, expectations for relatively muted levels of atmospheric blocking and cooler North Atlantic ocean temperatures, all suggest a milder summer, especially in those areas of the southern U.S. that have been plagued by hot summers in recent years.

“We are predicting that the year-over-year change in summer temperatures will be particularly noticeable in the Texas-based ERCOT power region, which suffered through a brutally hot and dry summer last year. We expect the warmest summer temperatures, relative to normal, to be found across parts of the north-central U.S. this summer. Finally, the oncoming El Nino event suggests that the warmest part of the summer is more likely to be early, with generally cooler temperatures later in the summer.”

Eastern traders discounted the spring snow that hit parts of New England Monday. “If you look at the weather for Boston and New York, they hardly got any snow at all. It’s a little cool but nothing crazy. We didn’t see prices go to $3 or anything,” said an eastern marketer.

However, next-day gas values for most of the Northeast trudged higher a second consecutive day. Deliveries to Algonquin Citygate added a couple of pennies and Transco Zone 6 into New York added a dime, but gas into Iroquois Waddington fell almost a dime. On Tennessee Zone 6 200 L Wednesday gas was up by a nickel.

Gulf points were strong as well. ANR SE was quoted a little more than a nickel higher and Columbia Mainline traded almost a dime higher. The Henry Hub also came in almost a dime higher for Wednesday delivery.

Futures traders saw the day’s decline as traders liquidating short-term positions. “Tuesday is the day before options expiration, and these guys just have to get out of some positions,” said John Woods, president of J. J. Woods and Associates.

He added that traders who earlier had sold $2 call options were “definitely” trying to keep May below $2 to prevent their options from landing in the money. “$2 is a nice little strike price, so I think you have a little battle going here,” a New York floor trader said.

He saw the sub $2 close as “an incentive for still lower prices, but look for buying to emerge at the $1.80 level.”

For all its intensity the storm pummeling the East Coast is expected to show mixed results when it comes to heating requirements. For the week ended April 28 the National Weather Service (NWS) calculates below-normal accumulations of heating degree days (HDD) for New England but greater than normal demands in the Mid-Atlantic and Midwest. New England is forecast to see 97 HDD, 16 below normal, and the Mid-Atlantic should experience 115 HDD, or 22 greater than normal. The Midwest from Ohio to Wisconsin is forecast to endure 115 HDD as well, 19 more than its typical seasonal tally.

For the heating season, which NWS measures from July 1, from New England to the Midwest heating requirements are down a stout 20-22%.

Analysts don’t see weather having much of a short-term impact on the market. Tuesday’s early price weakness underscores the fact that “upside price follow-through continues to be limited by decidedly bearish supply side fundamentals and a chart picture that is not yet signaling establishment of a price bottom,” said Jim Ritterbusch of Ritterbusch and Associates. It is his view that Monday’s 8-cent gain in May futures “appeared weather-inspired given a significant northeast cool down that should prove sufficient to slow next week’s reported storage injection.

“However, both the six-10 day and 11-15 day weather outlooks are showing a return to above-normal patterns across most of the nation, a development that provides a sizable offset against this week’s northeast cooldown. By and large, we remain reluctant to attach much importance to the weather factor as this shoulder period proceeds since the overwhelming pricing consideration will remain as a huge supply surplus that currently exceeds 900 Bcf.”

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