It was another lackluster week of natural gas trading as a comfortable late-summer warmth enveloped the country, and for the moment attention is centered on football and other fall activities rather than the vagaries of a winter heating season still to come.
The NGI Weekly Spot Gas Average fell 3 cents to $2.51, and most points were seen just a few pennies either side of 2 to 3 cent losses. Of the actively traded points the location with the week's greatest gain was Tennessee Zone 5 200 L with a 32-cent rise to $2.75. The week's biggest losers were Transco Zone 6 into New York City with a slide of 15 cents to $2.26 closely followed by Transco Zone 6 non New York north serving southeastern-most Pennsylvania and southern New Jersey with a drop of 13 cents to $2.25.
All regions with the exception of the Northeast experienced losses with California losing the most at 6 cents to $2.83. The Northeast added all of a penny to $2.04.
South Louisiana fell 4 cents to $2.61, and four regions gave up 3 cents: the Midwest to $2.78, East Texas to $2.61, South Texas to $2.60, and the Rocky Mountains to $2.55.
Prices in the Midcontinent averaged a 2-cent loss to $2.57.
October futures retreated 8.8 cents for the week to $2.605, and futures traders Thursday got an initial hiccup when the Energy Information Administration (EIA) released on-target storage of 73 Bcf. At the close, however, it looked as though almost no market-moving event had taken place. October finished down 0.8 cent to $2.652 and November was off 1.1 cents to $2.728.
The October futures slammed to a low of $2.603 after the number was released, but by 10:45 EDT October was trading at $2.654,down 0.6 cent from Wednesday's settlement. "As soon as the number was released, the market made a new low of $2.603, but then you looked back up and it was trading $2.66. That's how quick it was," a New York floor trader told NGI. "Why it jumped down, I don't know. We had heard numbers from 70 Bcf to 75 Bcf so it's right in there. It was a crazy move for no reason. I would think that was an algorithmic trader."
Neither bulls nor bears found much to their liking. "The 73-Bcf net injection for last week was a direct match with the consensus expectation, a neutral result," said Tim Evans of Citi Futures Perspective. "The refill was still slightly less than the 76-Bcf five-year average level, but this comparison looks rather neutral as well."
Prior to the release of the data analysts were looking for an increase right at 73 Bcf. Bentek Energy estimated 71 Bcf, utilizing its flow model, and IAF Advisors had calculated a 73 Bcf increase as well. A Reuters poll of 24 traders and analysts showed an average 73 Bcf with a range of 66 Bcf to an 78 Bcf injection.
A big wild card was the Labor Day holiday and its impact on demand. All indications are that the industry is on path to equal if not exceed the record 3,929 Bcf inventory established in 2012, and some analysts have suggested that 4,000 Bcf is in sight. The EIA predicts a 3,840 Bcf total by the end of the injection season.
Natgasweather.com predicted a build of 74 Bcf and said, "It was warmer than normal over much of the country, especially the northern U.S., while also relatively hot over the southern U.S. where plenty of 90s to locally 100s were observed, including over much of Texas, and even briefly into major California cities. This led to hotter temperatures week over week compared to last week's plus-68 Bcf build, although the long Labor Day weekend is expected to have led to lighter demand overall," the company said in a Thursday morning report.
Inventories now stand at 3,334 Bcf and are 456 Bcf greater than last year and 125 Bcf more than the 5-year average. In the East Region 50 Bcf were injected and the West Region saw inventories increase by 2 Bcf. Stocks in the Producing Region rose by 21 Bcf.
Buyers were in short supply Friday, and with mild temperatures forecast over the weekend and into Monday, traders saw little need to lock in three-day deals and losses were widespread. Only a single, thinly traded point made it to the positive side of the trading ledger. NGI's National Spot Gas Average for the three-day period fell 17 cents to $2.42. Both the Marcellus and Mid-Atlantic posted double-digit declines, but losses in the Midwest were just above a nickel. At the close of futures trading, October had retreated 4.7 cents to $2.605 and November was down 5.2 cents to $2.676.
Weekend and Monday prices at major trading centers across the country saw price declines as forecast temperatures remained within just a few degrees of seasonal norms. AccuWeather.com predicted that the high Friday of 87 in New York City would slide to 83 Saturday and 74 Monday. Chicago was anticipated to see a mild weekend with highs Friday of 76 dropping to 66 Saturday and Los Angeles' high Friday of 88 would rise to 91 Saturday before retreating to 84 by Monday. The normal high in Los Angeles in mid-September is 83.
The biggest declines were seen in the Northeast and Mid-Atlantic. Weekend and Monday gas on Texas Eastern M-3, Delivery shed 27 cents to $1.30, and packages bound for New York City on Transco Zone 6 tumbled 83 cents to $1.60.
Major trading centers saw declines as well. Gas at the Chicago Citygate dropped 7 cents to $2.64, and weekend and Monday deliveries at the Henry Hub shed a nickel to $2.63. Gas on El Paso Permian came in 7 cents lower at $2.49, and deliveries to SoCal Citygate shed 11 cents to $2.80.
Monday on-peak power also made incremental gas purchases less attractive. Intercontinental Exchange reported that Monday on-peak power at the PJM West Hub fell $6.59 to $31.61/MWh and deliveries to ISO New England's Massachusetts Hub dropped $9.11 to $42.06/MWh.
Differentials between the Marcellus and delivery points on the newly minted westbound capacity of Rockies Express Zone 3 (REX) widened. Gas on Millennium shed 18 cents to $1.16, and parcels on Transco-Leidy Line were quoted 11 cents lower at $1.22. Gas on Tennessee Zn 4 Marcellus came in 21 cents lower at $1.05. Gas on Dominion South changed hands 27 cents lower at $1.21.
According to the NGI REX Zone 3 Tracker, gas at the Moultrie, IL, interconnect with NGPL fell a nickel to $2.56, and packages at the Midwest Pipeline junction at Edgar, IL, fell 6 cents to $2.56. Gas on REX Zone 3 at the ANR point in Shelby, IN, changed hands at $2.56, down 7 cents.
Analysts are looking for weak near-term price action. "This market is likely to finish this week on a soft note with values slipping slightly," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning note to clients. "With weekend temperature shifts no longer a significant concern, we look for the money managers, etc. to be more on the offensive as the week winds down. Yesterday's chart breakdown to new lows is important in our view despite the fact that it was quite brief and there was no downside follow-through.
"We look for selling to be revived next week amidst lack of supportive weather influence. We also feel that the market may still need to discount a sizable upswing in injections per [the next] EIA release."
Gas buyers over the weekend across the PJM footprint won't have a great deal of renewable energy at their disposal to offset purchases. WSI Corp. in its Friday morning forecast said, "A southwest-to-northwest wind will support modest wind generation during the next two days. Output is forecast to vary between 1 to 3 GW. Wind gen will subside and become changeable during the weekend into early next week.
"A cold front and wave of low pressure will support an increasing chance of showers and thunderstorms over western PJM during the next couple of days. Otherwise, unseasonably warm and moderately humid conditions will persist in the Mid-Atlantic with highs in the 80s. The cold front will push into the Mid-Atlantic during Sunday morning with a slight chance of a few showers, [and] this will attempt to usher high pressure and more seasonable conditions into the power pool as the weekend progresses and into early next week," the forecaster said.
Once the EIA released its storage figure Thursday, October quickly broke to $2.603 but rebounded. Market technicians are thinking that may well augur further declines. "Well, we got the break beneath the $2.624 low we were looking for. However, natural gas promptly found support into the $2.602-2.595-2.585 (0.618 <a>=<c>) zone," said Brian LaRose, technical analyst at United ICAP in closing comments Thursday.
"So, is that all she wrote? Only one way to signal that Thursday's $2.603 low marked the end of this decline, bulls need to climb back above $2.753-2.769. Will be looking for a slide to 2.484 (<a>=<c>) otherwise."