Physical natural gas for the weekend and Monday was broadly lower in spite of some isolated market strength in the Northeast and Gulf Coast.
Overall, traders found it unattractive to make weekend and Monday deals as mild weather was forecast over many natural gas markets. The NGI National Spot Gas Average fell 7 cents to $2.17, and eastern points on average were down about a nickel as well. Futures trading was lackluster, at best, with the November contract adding less than a penny, 0.4 cent, to $2.502; December crept higher by 0.6 cent to $2.718. November crude oil gained 20 cents to $49.63/bbl.
Temperatures from the Mid-Atlantic to the Great Lakes were expected to be mild and pleasant over the weekend. Forecaster Wunderground.com predicted New York's Friday high of 76 degrees would slide to 64 Saturday but bounce back to 74 by Monday. The normal high in New York in mid-February is 66. Chicago's peak of 68 Friday was seen easing to 67 Saturday before climbing to 73 Monday. The seasonal high in the Windy City is 66.
Prices across the nation's populous midsection were mostly lower. Gas at the Chicago Citygates fell 4 cents to $2.40, and deliveries to the Henry Hub skidded 8 cents to $2.36. Packages at the NGPL Midcontinent Pool changed hands 7 cents lower at $2.28, and gas at the SoCal Citygates was seen 4 cents lower at $2.73.
Marcellus points were on the defensive. Gas for weekend and Monday delivery on Millennium shed 9 cents to 76 cents, and gas at Transco Leidy gave up 7 cents to 74 cents. Gas on Tennessee Zn 4 Marcellus was quoted 7 cents lower at 72 cents, and deliveries on Dominion South were seen down 13 cents to 79 cents.
New England points did manage to post some gains. Gas at the Algonquin Citygate added 12 cents to $2.49, and deliveries to Iroquois Waddington fell 9 cents to $2.51. Gas on Tenn Zone 6 200L rose 9 cents to $2.39.
Forecast summer-like conditions across the Midwest typified the gas trading landscape for the weekend. "The Chicago area will experience dry, sunny skies into the middle of the week that will make for ideal autumn conditions, said AccuWeather.com's Katy Galimberti. "Dry weather will create pleasant conditions for spectators of the Chicago Marathon on Sunday, but higher temperatures could make for uncomfortable heat for runners. Temperatures are expected to hit into the middle to upper 70s F, about 10 degrees higher than average for this time of year. After the brief shot of warmth, temperatures will begin to pull back down to normal levels on Monday. Daytime highs are expected to fall near the 70-degree mark."
Baker Hughes reported Friday that nationally the land rig count dropped from 776 to 760 for the week ended Oct. 9. However a closer look provided by industry consultant Genscape's Utica Permit Model, a tally of activity in the Utica Shale of southeastern Ohio, shows activity more like "pedal to the metal."
For the last three weeks Genscape shows total wells drilled, drilling, and permitted on a steady rise, from 1,004 as of Sept. 19 to 1,003 Sept. 26 to 1,010 Oct 3. "The number of wells permitted isn't as high as it used to be, but that doesn't mean that the wells we have aren't producing at a high level," Genscape analyst Erik Fabry told NGI. "We've seen a high level of production from existing wells whether that is from deferred inventory or active wells in general."
Analysts see any further advances in near-term futures as selling opportunities. "Although the reported 95 Bcf injection was only a couple Bcf below average street expectations, it appears that the money managers are still looking for reasons to trim a sizable short holding ahead of an extended holiday weekend that could bring some significant adjustments to the short-term temperature views," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday.
"But for now, most outlooks remain skewed in favor of above-normal trends with extension out to about the 21st of this month. This virtually assures some additional unusually large injections that could culminate in an end of October supply of about 4 Tcf with an additional week or two of increase possible into November should mild trends be sustained. Finally, we will concede to some bullish spillover from the stout liquid markets. We anticipate some modest upside price follow-through, and we would suggest shorts within December futures on further rallies into the $2.75-2.80 zone."
Longer term, analysts also see a soft market. Earlier in the week, Raymond James & Associates Inc. reduced its 2016 Henry Hub price estimate by 90 cents, while Tudor, Pickering Holt & Co. (TPH) cut its price deck by $1.00, citing decreasing industrial demand growth and rising takeaway capacity from the Northeast.
Raymond James cut its Henry Hub estimate for the second time in two months to $2.35/Mcf from $3.25; the long-term forecast was cut to $2.75 from $3.25. In August the firm had cut its forecast for 2016 to $3.25/Mcf from $3.75. TPH lowered its forecast to $3.00 from $4.00; longer term, prices now are forecast at $3.50.
Buyers for power generation over the weekend across the MISO power pool may be able to cut back on their purchases as hefty wind generation is forecast. WSI Corp. in its Friday morning report said, "A cold front will slide across the lower Midwest and Mississippi Valley [Friday], bringing a round of showers and a few storms. This will begin to usher more seasonable temperatures into the power pool. Temps will retreat into the upper 50s, 60s and 70s.
"After a brief decline, a southwest-to-northwest flow will likely cause wind gen to ramp up and become relatively strong during the weekend into the start of next week. Output might top out around 8-10 GW."