Physical natural gas prices for Tuesday delivery languished mostly unchanged in Monday's trading with a few exceptions in the Northeast that managed 30-plus cent gains. Most points traded within just a few pennies of Friday's quotes and NGI's National Spot Gas Average was up a nickel at $2.59.
Futures trading was equally uninspired, and at the close September had added 3.2 cents to $2.748, and October was higher by 2.8 cents to $2.777. September crude oil plunged $1.95 to $45.17/bbl.
Futures traders see the market constrained by supply.
"Depending on what happens with any hurricane season adjustments and things of that nature, there is still a lot of gas out there no matter how you look at it," said a New York floor trader. "My play would be to maybe buy a call option and just try to cover yourself that way in case the market maybe moves up.
"I would not be a buyer of puts. December is $3.05, and any conventional weather is already priced in. If it's not, how much higher could the market go? $3.25? We are not talking that much more in the scheme of things. I am by no means bullish this market, but if I had to [manage risk] I would contemplate buying a call just to cover the upside if it does swing that way.
"Buy a $4 December or January call and if it moves up that way, at least you have yourself covered."
The trader said there was plenty of activity in the futures market. Volumes in the spot contract often exceed 100,000 per day. "We are not seeing it where people are not trading the natural gas."
Weather models crept warmer over the weekend.
The forecast on Monday "gained a little bit of demand on weaker cooling in the Midwest and some heat across the South at times" but "no widespread, extreme heat is expected through the next two weeks," said Commodity Weather Group President Matt Rogers in a morning report.
"While modest heat lingers on the East Coast to start this week, cooling is already advancing into the Midwest and arrives in the East by midweek. This ushers in a period of seasonably cool temperatures in these regions that lasts into the 11-15 day.
"Meanwhile, Texas...continues to see some heat. While not extreme by Texas standards, highs in Dallas look to be around 100 F the next two weeks, and Houston gets close as well. It is worth noting that the European ensemble has been offering some hotter risks for Texas at times through the six-15" day forecast. "The West, meanwhile, is looking variable with a seasonable six-10 day and a hotter-leaning 11-15."
Risk managers see little to get excited about in today's market. Mike DeVooght, president of Colorado-based risk management firm DEVO Capital,noted that the $3.00 mark has been a tough nut to crack. "But as we've seen over the past few months, hedge selling as we approach the $3.00 level pushed the market lower" last week. "The weekly gas storage number came in with a slightly lower injection than anticipated, but the news was not enough to support the market. Moderate temperatures, more than adequate supplies and general weakness in the commodity markets continue to keep the gas market under pressure.
"On a trade basis, it's difficult to make a case for a significant move, either up or down, in the gas market at this time. We will continue to stand aside and await future developments." DeVooght advised trading accounts, end users and producers to not take any positions.
Technical analysts, on the other hand, are sensitive to looming danger for the bulls (producers). "No change," said United ICAP market technician Brian LaRose. The firm pegs "$2.679 as our line in the sand for the bulls. Hold this level and the bulls have a shot at completing an ABCDE triangle off the $3.105 high.
"But that means it is bottom or else to start the week," LaRose said. A failure "to turn higher in front of this level, and a drop to $2.612, 2.402 even to new lows, becomes possible from here. We reiterate our call for a protective sell stop beneath $2.679."
In the Mid-Atlantic, next-day prices on balance improved in spite of a big drop in next-day on-peak power. Intercontinental Exchange reported that Tuesday on-peak at the PJM West Hub tumbled $16.86 to $37.36/Mwh.
Gas on Tetco M-3 Delivered gained 3 cents to $1.47, and deliveries on Millennium shed 3 cents to $1.25. Tuesday parcels on Dominion South added 3 cents to $1.35.
New York and Boston saw stout advances as warm temperatures were expected to hang around until a break in the heat on Wednesday. Forecaster Wunderground.com said Monday's high in Boston of 91 would hold Tuesday at 90 before receding to 84 on Wednesday. The normal high in Boston in early August is 81. New York City's Monday max of 89 was seen rising to 91 Tuesday before staging a modest retreat to 86 on Wednesday. The seasonal norm for New York is a high of 84.
Gas at the Algonquin Citygate gained 30 cents to $2.26, and deliveries to Tenn Zone 6 200L also changed hands 30 cents higher at $2.16. Gas on Transco Zone 6 into New York City was quoted 35 cents higher at $2.52.
In California, prices advanced as power loads were expected to rise. CAISO predicted Monday's peak power load of 37,875 MW would rise to 39,715 MW Tuesday.
Gas at the PG&E Citygate fell a penny to $3.15, and parcels at the SoCal Citygate added 4 cents to $3.11. Gas at the SoCal Border advanced 4 cents to $2.91, and gas on El Paso S Mainline rose 6 cents to $2.94.
Gas buyers for electrical power generation in PJM won't have much in the way of wind power to offset purchases.
"A variable westerly breeze will support minor wind generation" Monday and Tuesday, " where output is expected to hover in the 1 GW range," said WSI Corp. in its Monday forecast. "A cold frontal passage Wednesday could support elevated generation prospects through the latter half of the period."