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NatGas Cash, Futures Steady as Mild Temperatures Expected

Physical natural gas trading on Tuesday for Wednesday delivery saw prices on average move very little.

Temperatures along the eastern corridor were expected to be right at seasonal averages, thus lessening the need to make incremental purchases. The NGI National Spot Gas Average was 2 cents higher at $2.23, but at eastern points prices overall slid about a nickel. Futures had difficulty deciding on a direction. November rose 2 cents to $2.470 and December shed 0.3 cent to $2.673. November crude oil surged $2.27 to $48.53.

Next-day quotes at eastern points fell hard as near-term temperatures were expected to stay right at normal levels. Forecaster AccuWeather.com predicted that the high in Boston Tuesday of 66 degrees would rise to 71 Wednesday before falling to 62 Thursday. The seasonal high in Boston is 65. New York City's 72 high Tuesday was seen making it to 74 Wednesday before easing to 68 Thursday. The normal early October high in New York is 67. Philadelphia's Tuesday maximum of 73 was forecast to reach 75 Wednesday before sliding to 71 Thursday. The normal high in the City of Brotherly Love is 70.

Gas in the Mid-Atlantic was mixed, but New England points softened. Gas on Texas Eastern M-3, Delivery fell 20 cents to $1.08, and gas bound for New York City on Transco Zn 6 rose 12 cents to $2.40.

At the Algonquin Citygate, next-day deliveries fell 15 cents to $2.89, and gas at Iroquois, Waddington was quoted a penny lower at $2.73. Deliveries to Tenn Zone 6 200L came in at $2.80, down 9 cents.

Next-day power was mixed. Intercontinental Exchange reported that on-peak power Wednesday at the ISO New England's Massachusetts Hub rose $1.32 to $35.77/MWh and peak power at the PJM West Hub fell $2.00 to $34.05/MWh.

Farther west, quotes on the newly expanded REX Zone 3 system now taking gas west out of the Marcellus rose. Deliveries to the NGPL interconnect at Moultrie County, IL, added 3 cents to $2.30 and gas on Midwest at Edgar County, IL, added a nickel to $2.32. Parcels delivered to the ANR interconnect at Shelby County, IN, also rose a nickel to $2.32.

Natural gas markets do tend to repeat themselves, and technical oscillators can be useful tools. Tom Saal, vice president at FC Stone Latin America LLC, said, "In the immortal words of Yogi Berra, 'It's deja vu all over again!'" Physical market shorts should pay attention.

Utilizing monthly data, he pointed out that the present monthly oversold pattern on the stochastic looks similar to what happened in 1999 with a median price at 2.260, "then, a year later, $10.00."

In 2008 a monthly stochastic overbought pattern showed overbought conditions with a median price at $8.200, "not a good technical signal to lock in several years. I believe the current natural gas futures market is more in a condition like [1999] than [2008]. Why wait till [2008] re-appears?"

Analysts in the near term see a delayed start to any seasonal price advance.

"There were relatively minor revisions in the short-term forecasts over the weekend, with model consensus suggesting above-normal temperatures will dominate much of the country through mid-October," said Teri Viswanath, director of natural gas strategy at BNP Paribas, in a note to clients. "While the western states will likely experience the warmest weather, unseasonably mild overnight temperatures in the Midwest and Northeast should limit heating demand during the forecast period. Consequently, the benign weather outlook suggests to us that the weekly stock build should continue to rival year-ago levels through the balance of the month.

"Based on last week's interstate pipeline receipts, we expect EIA to announce another triple-digit inventory release this week with initial estimates suggesting a 102-Bcf build for the week ending Oct. 2nd. This compares to last year's 106 Bcf injection and the five-year average of 92-Bcf. More fall-like conditions over the past weekend should result in a slight week-on-week decline in storage injections, or a possible 92-95 Bcf inventory build for the week ending Oct. 9th. All told, the seasonal lift-off that normally occurs as the industry transitions into the heating season will likely be delayed given the continued mild weather."

Overnight weather models showed a slight bit of increased cooling and heating requirements.

"Overnight models gain some slight demand," said Commodity Weather Group in its Tuesday morning forecast. "The latest models gained, thanks to a combination of minor heating and cooling degree day gains. Changes were mixed in the models, and there is still considerable disagreement on the degree of possible cooling associated with a new spike of high pressure ridging toward far northwest Canada into the Alaska area," said Matt Rogers, president of the firm.

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