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Mid-Atlantic Gains Balance New England Losses; Futures Slide Ahead Of Storage Stats

Next-day prices for physical gas traded Wednesday moved little as hefty losses in New England were largely balanced by gains in the Mid-Atlantic, Marcellus, and Gulf. Great Lakes and Rockies prices were mostly mixed, but California locations were higher.

Overall the physical market rose 2 cents to average $3.39. Futures continued to slump, with November losing over a nickel, and at the close, November was seen 5.2 cents lower at $3.659 and December dropped 5.5 cents to $3.745. December crude oil fell $1.97 to $80.52/bbl.

Weather forecasters in the New England area called for load-killing rain and thunderstorms with temperatures rising Thursday to right at or slightly above seasonal norms.

"A strengthening Nor'easter will bring rain and wind to the Boston area during the middle part of the week," said AccuWeather.com meteorologist Alex Sosnowski. "The worst of the storm, wind-swept rain and coastal flooding, will target New England and neighboring Canada.

Gusty winds may make use of an umbrella difficult through Thursday. Flight delays due to gusty winds are possible throughout the Northeast. The combination of rain, wind and other conditions will cause [wind chill] temperatures to dip into the 40s at times."

Coastal flooding at high tide was “possible through Thursday, due to the storm and high astronomical tides associated with the upcoming new moon.” However, good news awaits “people with outdoor or travel plans this weekend. The storm will weaken and move away, allowing moderating temperatures. However, a sneaky, weaker storm may bring spotty showers and blustery conditions Saturday night and Sunday."

AccuWeather.com predicted that Boston's high Wednesday of 56 would rise to 61 Thursday and slip back to 57 Friday. The normal high in mid-October is 59. Providence, RI's 57 reading Wednesday was expected to make it to 62 Thursday and ease to 59 Friday. The seasonal high in Providence is 61. New Haven, CT's 60 high on Wednesday was forecast to inch lower Thursday to 59 and then to 61 Friday, the normal high.

Forecast power loads and next-day power pricing were expected to ease heading toward the weekend. ISO New England anticipated that peak power load Wednesday of 16,350 MW would hold Thursday and slide to 16,020 MW Friday. The PJM Interconnection predicted a maximum load Wednesday of 32,248 MW declining to 31,801 MW Thursday and falling to 30,174 MW Friday.

Peak power delivered Thursday at the PJM West terminal fell 49 cents to $42.10/MWh, and off-peak power Thursday at the ISO New England Massachusetts Hub shed $6.65 to $24.00/MWh.

Gas for Thursday at the Algonquin Citygates fell 24 cents to $2.74, and packages at Iroquois Waddington were seen a dime lower at $3.56. Gas on Tennessee Zone 6 200 L skidded 24 cents to $2.75.

Prices in the Mid-Atlantic and Marcellus for the most part firmed. Gas bound for New York City on Transco Zone 6 gained 6 cents to average $2.68, and deliveries to Tetco M-3 added 12 cents to $2.60.

On Millennium, next-day packages were observed 8 cents higher at $2.41, and parcels on Transco Leidy were quoted 14 cents higher at $2.44. Gas on Tennessee Zone 4 Marcellus changed hands at $2.22, down 4 cents, but on Dominion South, next-day packages came in at $2.45, down 7 cents.

In the Rockies, prices were narrowly mixed. At the Cheyenne Hub, Thursday gas fell 2 cents to $3.46 and on CIG Mainline, next-day deliveries were quoted 3 cents lower to $3.42. On Northwest Pipeline Wyoming, Thursday gas rose 3 cents to $3.42, while gas at Opal added a penny to $3.48.

A Michigan marketer reported having to shift volumes between customers due to heavy earlier index-based purchases.

"We haven't bought gas in a while and are just moving gas between customers since we bought so much at the beginning of the month. With the warmer weather we are having to be careful," he said. "Prices on Consumers are down to $3.73, but we aren't buying. We may have to sell back some gas."

Analysts focusing on Thursday's storage report by the Energy Information Administration (EIA) suggested that last week's plump reported storage build (94 Bcf) might prompt somewhat inflated estimates this week and lead to a number coming in actually lower than expectations.

"For this week’s EIA storage report, early analyst guidance suggests a similar build to last week's release of 94 to 98 Bcf for the week ending Oct. 17th," said BNP Paribas analyst Teri Viswanath, director of commodity strategy for natural gas. "The EIA announced an 86 Bcf injection for the same week last year while the five-year average is a 70 Bcf build.

“We expect that last week's outsized stock report might inflate more than a few of the analyst projections, opening the door to a lower-than-expected release this week. Nevertheless, even a lighter build that approaches 100 Bcf could hardly be categorized as constructive for prices."

She said the weather forecast on Tuesday looked less constructive and “featured additional demand losses, especially in key heating markets in the Midwest and Northeast. And while normal progression might enable the cooler pattern developing in the U.S. late next week to move eastward, conditions remain largely unfavorable for lingering cold weather at the start of the heating season.

“This weather outlook is a dramatic departure from the year-ago pattern when heating demand began to build this week, significantly tapering the build in inventories. The extended outlook for much looser supply-demand balances implies that the industry will likely convert the year-on-year storage deficit into a surplus before year-end. Indeed, based on our analysis, we see the possibility of another 100 Bcf reduction in the stock shortfall by month-end."

Thursday's numbers should give an idea if that 100 Bcf additional reduction in the deficit is in the cards. Most analysts see the fill right at the century mark. ICAP Energy forecasts an increase of 98 Bcf and Citi Futures Perspectice is calling for a 103 Bcf injection. A Reuters poll of 23 traders and analysts showed an average 97 Bcf with a range of 90 to 103 Bcf.

Weather forecasts changed little Tuesday overnight.

"Details shifted around a bit on next week's weather with cold front timing differences, but the general warm-prevailing view continues," said Matt Rogers, president of Commodity Weather Group on Wednesday morning. "Progression of slightly cooler weather into the Midwest and East by mid to late next week helps to ease the map anomalies, so we lose coverage of the moderate above normal today on much of the map. The 11-15 day is evolving into quite the complicated pattern.

“Big high-pressure ridging building around Alaska is helping to shift cooler to colder surface high pressure south toward the U.S., but the models are debating where it goes and how strong."

Tom Saal, vice president at INTL FC Stone, in his work with Market Profile expects the market to test Tuesday's value area at $3.676-3.650. It "could test" $3.771-3.743 as well. Saal pinpointed this week's initial balance at $3.714-3.641. Breakouts above the high end of the initial balance should be bought, and breakdowns below the low end of the initial balance should be sold, according to Market Profile methodology.

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