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Futures, Cash Trend in Opposite Directions; December Adds 17 Cents

Physical gas prices for Tuesday delivery fell hard in Monday's trading as a warming trend was forecast for key eastern population centers.

The Marcellus Shale region was the only area showing improved prices and quotes there managed to post gains of as much as a quarter. New England and the Mid-Atlantic were down by double digits, and the Gulf Coast was off by a nickel or more. The overall market decline came to 11 cents. Futures prices responded to longer-dated weather forecasts and shot higher. At the close, December had risen 17.3 cents to $4.046 and January was higher by 18.6 cents to $4.145. December crude oil fell $1.76 to $78.78/bbl.

Active weather patterns were forecast for the Eastern Seaboard, but the bottom line proved to be warming trends out to the middle of the week. The National Weather Service in suburban Philadelphia said, "high pressure across the southeastern United States will gradually shift offshore through Tuesday. A cold front will approach from the west on Wednesday but stall before reaching our area. Low pressure forms along the stalled boundary and will move through the Ohio Valley on Thursday, crossing our area before tracking up into New England late Thursday. High pressure will then build across the area on Friday, sliding offshore on Saturday. Another low-pressure system forms along an approaching cold front and moves up the middle Atlantic coast late Saturday into Sunday."

Forecaster Wunderground.com predicted that Monday's high of 53 in Boston would reach 58 on Tuesday and 63 on Wednesday. The normal high in Boston for early November is 56. New York City's 61 high Monday was expected to reach 64 Tuesday and 65 by Wednesday. The seasonal high in New York City is 58. Philadelphia's 59 high Monday was anticipated to make it to 66 Tuesday and Wednesday. The normal high in Philadelphia is 57.

Gas for Tuesday at the Algonquin Citygates shed $1.75 to $4.89, and packages on Iroquois Waddington fell 19 cents to $3.83. Deliveries to Tennessee Zone 6 200 L fell $2.08 to $4.36.

Gas on its way to New York City on Transco Zone 6 shed 11 cents to $2.65, and parcels on Tetco M-3 were off by 7 cents to $2.58.

Appalachia and Marcellus points were firm. Gas on Millennium added 17 cents to $2.42, and deliveries to Dominion South shed 9 cents to $2.35. On Transco Leidy, Tuesday packages were seen at $2.27, up 18 cents, and gas on Tennessee Zone 4 Marcellus gained 9 cents to $2.04.

According to industry consultant Genscape, Texas Gas Transmission LLC will be conducting meter maintenance at the Texas Gas-Lebanon Interconnect with Rockies Express Pipeline Nov. 1 through the 11th in Lebanon County, OH.

"During this time Texas Gas will cut capacity to 0 from its normal operating capacity of 140 MMcf/d. During the past 14 days flows through the TGT/REX Lebanon interconnect have averaged 120 MMcf/d. Potentially displaced gas is likely to get backed upstream to TGT's Slaughters Compressor for redirection to the west leg of the TGT system and/or to ANR."

Gulf quotes took a beating. At the Henry Hub next-day deliveries changed hands at $3.72, 8 cents lower, and parcels at Katy shed 11 cents to $3.51. Next-day gas on Tennessee 500 L fell 4 cents to $3.65, and on Columbia Gulf Mainline gas was quoted at $3.61, 6 cents lower. Gas at Transco Zone 3 fell 2 cents to $3.71.

Weather forecasts overnight turned sharply colder. Commodity Weather Group in its morning six- to 10-day forecast shows the eastern two-thirds of the country at below-normal readings with the desert Southwest, Great Basin and California as above to much above normal. "The modeling over the weekend continued their trend started late last week to intensify a high-latitude blocking pattern that optimizes cold air transport into the U.S.," said Matt Rogers, president of the firm.

"The jet stream pattern looks impressive, with ridging up along the West Coast connecting to the Yukon and Alaska as well as the North Pole to generate a strong negative Arctic Oscillation (AO). Such a strong apparatus suggests pattern durability also with the growing potential for November 2014 to outperform 2013's demand story nationally. [Monday's] forecast favors the European ensemble more than other guidance as it was the first (since last Wednesday) to start showing this significant pattern transition, but since it is November, we still need to keep a close watch out for variability in the pattern (even last year we saw occasional warmer breakdowns in the colder November pattern)."

One forecaster doesn't see the higher open as warranted by "facts."

"Weather patterns trended colder over the weekend on a couple weather systems starting later this week, but not enough to justify the extreme move that occurred," said Natgasweather.com in a Monday morning report. "In addition, the 00z operational GFS [Global Forecast System] has just come in and it's slightly warmer for the system late this week and quite a bit warmer for the November 11-12th system, which is the one that had trended the coldest over the weekend."

How long warmer temperatures may be around is anyone's guess after mid-November. Forecasters see a repeat of last year's frigid winter. At theweathercentre.blogspot.com, analysts took a look at a number of factors they think will contribute to a colder than normal winter, if not a repeat of the brutal winter of 2013-2014. They studied SST Anomalies in the Sea of Japan, above normal water temperatures in the Gulf of Alaska, above-normal temperature anomalies in the Bering Sea, temperatures near Greenland, and the likelihood of a weak El Nino.

Current cold waters in the Sea of Japan allow the jet stream to pull further south and forecasters cite the "Typhoon Rule," in which storminess and cold in Japan will often hit the U.S. six to 10 days later.

A pool of warm water in the Gulf of Alaska hasn't weakened at all and that permits ridging and high pressure to form, which is setting up conditions similar to 2013-2014 in which Wisconsin, Minnesota, and northern Illinois were hit with bone-chilling cold.

Developments in the Bering Sea could be a real wild card, and current above-normal temperatures there could act to keep the Gulf of Alaska cold and stormy and prompt a ridge of high pressure to form over the Rockies. That could send cold to the central and eastern United States. If the ridging shifts more to the east, the central United States becomes warm.

There are also above-normal temperatures in the waters near Greenland, and that allows for persistent ridging there and eastern Canada, possibly setting up a blocking pattern and obstructing the normal west-east flow of the jet stream.

At present, the thinking is for a weak El Nino to form during the winter. If that is the case, California would receive much-needed rain, and the West would enjoy above normal temperatures, which would stretch all the way to the Upper Midwest. Cold weather would be in play in the Ohio Valley.

Tom Saal in his work with Market Profile was looking for the market to test last week's value area at $3.849 to $3.641 before moving on and testing $4.244 to $4.076. "Look for a short-covering rally…and we know who is net short now…professional speculators," he said in a Monday morning note to clients.

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