Weekly gains in the Northeast, prompted by a late week $1+ surge at some points, along with a strong showing at California locations, helped lift weekly natural gas quotes nationally to a nearly dime gain overall.
TheNGI Weekly Spot Gas Average rose 9 cents to $2.31 and gains were widespread with only a handful of points followed by NGI slipping into the loss column.
The Northeast was home to the week's greatest advances, with Tennessee Zone 6 200 L adding 53 cents to $3.13 and Algonquin Citygate right behind with a jump of 51 cents to $3.22. The week's biggest loser proved to be Dawn, with a modest loss of a nickel to $2.58. Regionally, the Northeast gained the most tacking on 19 cents to $1.92, and the Midwest brought up the rear with adds of 4 cents to $2.50.
East Texas, South Texas, and South Louisiana all posted gains of a nickel to $2.39.
The Midcontinent added 6 cents to $2.35, The Rockies rose 8 cents to $2.31, and California was up by 11 cents to $2.68.
November futures hummed an opposite tune to the firming cash market and for the week fell 7.2 cents to $2.430. A big chunk of the weekly decline came at the hands of the weekly Energy Information Administration (EIA) storage report, which came in a somewhat larger size than traders were expecting. The EIA reported a build of 100 Bcf, which was a bit more than the low 90 Bcf traders were expecting. At the close November had given up 6.5 cents to $2.453 and December was off 4.6 cents to $2.686.
A few traders were caught off guard when the EIA announced inventory figures at 10:30. In the minutes prior, November natural gas futures were trading at $2.568, up a nickel from Wednesday's regular session close. However, in the minutes that immediately followed the release, the prompt-month contract dropped to $2.507, down 1.1 cents from the close. As of 11 a.m., the November contract was trading at $2.496, down 2.2 cents from Wednesday.
Prior to the release of the data the consensus was centered around a low to mid 90 Bcf figure. Stephen Smith Energy calculated a build of 89 Bcf, and Ritterbusch and Associates was looking for an addition of 95 Bcf. A Reuters survey of 29 traders and analysts showed a sample average of 93 Bcf with a range of 86 to 104 Bcf. The actual injection was larger than both last year's 96 Bcf build and the five-year average injection of 87 Bcf.
Citi Futures Perspective analyst Tim Evans, despite being on the record with a 104 Bcf build prediction, deemed the 100 Bcf injection as "bearish," and more than expected. "The 100 Bcf build in U.S. natural gas storage for last week was a bearish surprise relative to consensus expectations for 91-93 Bcf in net injections," he said. "It was still slightly below our model's 104-Bcf estimate however, and so mildly constructive in terms of where we would peg the background supply-demand balance. The reaction to the news sets technical resistance at today's high."
Analysts recognize the potentially bearish implications for the large inventory build, but Evans sees the market as "conservatively valued and oversold, which should limit the downside and could translate into a short-covering rally on any early heating season cold."
As of Oct. 9, working gas in storage stands at 3,733 Bcf, which is 447 Bcf higher than last year at this time and 168 Bcf above the five-year average of 3,565 Bcf, according to EIA estimates. For the week, the East Region deposited 51 bcf and the Producing Region added 38 Bcf, while the West Region chipped in 11 Bcf.
At 3,733 Bcf, current storage levels are already 122 Bcf above last year's injection season high of 3,611 Bcf, while just 196 Bcf below the all-time record storage level of 3,929 Bcf, which was set for the week ending Nov. 2, 2012. With at least three or four more injections expected this season based off of historical injection cycles, 2015 storage levels are likely to eclipse the 2012 record high and threaten the mythical 4 Tcf mark.
In Friday's trading natural gas for weekend and Monday delivery was a tale of two markets as quotes in the Northeast rocketed higher on much cooler than normal temperature forecasts and the West suffered double-digit losses amid a weak power environment and a seasonal temperature regime.
The NGI National Spot Gas Average fell 6 cents to $2.32, but eastern points on average jumped more than 40 cents and California skidded just under 20 cents. Futures prices continued to slip slide away with the spot November contract approaching three and a half year lows. November settled at $2.430, down 2.3 cents, and December was off 3.6 cents to $2.650. November crude oil added 88 cents to $47.26/bbl.
By Monday temperatures at major eastern population centers were expected to be about 10 degrees below normal. Forecaster Wunderground.com predicted that the Friday high in both Boston and Hartford, CT, of 60 would drop to 55 by Saturday and 50 by Monday. The seasonal high at both points is 61. New York City was expected to see its high of 62 Friday dip to 55 Saturday and Monday, 9 degrees below normal.
Gas at the Algonquin Citygate jumped $1.87 to $4.81, and gas at Iroquois, Waddington added 5 cents to $2.73. Deliveries to Tennessee Zone 6 200 L vaulted $1.90 to $4.76.
Stout Monday power prices in the Mid-Atlantic gave quotes a boost. Intercontinental Exchange reported that Monday on-peak power at the PJM West terminal rose $13.05 to $48.56/MWh.
Gas for weekend and Monday delivery on Tetco M-3 rose 24 cents to $1.76, and gas bound for New York City on Transco Zone 6 added 10 cents to $2.44.
The National Weather Service in southeast Massachusetts said, "blustery northwest winds and unseasonably chilly air will move in this weekend...with the coldest air of the season from Saturday night through Monday. A hard freeze is expected for much of the region. A quick return to milder temperatures will follow for Tuesday through Thursday."
It was a far different situation on the West Coast where mild temperatures and a soft power pricing environment gave traders little incentive to make three-day purchases. Intercontinental Exchange reported on-peak power Monday at SP-15 eased 23 cents to $36.19/MWh, but other power market locations for ultimate delivery into California were weaker still. Peak power Monday at Mid-Columbia shed $3.08 to $20.94/MWh and power at Palo Verde fell $1.41 to $27.41/MWh.
Gas for weekend and Monday delivery at Malin came in 16 cents lower at $2.27, and gas at the PG&E Citygates fell 8 cents to $2.96. Gas at the SoCal Citygate shed 21 cents to $2.64, and deliveries to SoCal Border points averaged $2.43, down 23 cents. Gas on the El Paso S. Mainline/N. Baja retreated 26 cents to $2.43.
Wunderground forecast that the Friday high in Los Angeles would be a pleasant 76 and that would give way to a 78 high on Saturday and a 75 high on Monday, the seasonal norm. San Francisco's 68 high was seen rising to 69 Saturday and 72 by Monday. The normal high for the City By The Bay is 71.
Despite the bearish storage report Thursday, analysts still see spot futures migrating back up to as high as $2.70. "[W]ith weather slowly materializing, power loads strong and production soft, we see support for the contract to move back into our target $2.55-2.70/MMBtu price range through end-month, in spite of [Thursday's] bearish report," said Breanne Dougherty, an analyst with Societe Generale in New York. "Our attention now shifts to November. The current December/January premiums over the front-month will shrink, but the dominant direction of the convergence hinges on when (if?) the 4Q production uptick materializes, and weather.
"We see more upside price risk relative to today between now and early December, but would not want to hold much $2.80-plus/MMBtu exposure on core winter contracts beyond that point given the risk of a mid-winter downward price correction in anything other than a cold weather scenario [El Nino?].
"There is no denying that domestic production continues to be the dominant wildcard for near-term fundamentals. While our 14-month production outlook is relatively flat, the view has two distinct parts to it. The first is tied to the current and immediate-term daily production trend; the second, to the larger more structural story line that has emerged this year," she said in a Thursday note to clients.
WSI Corp. in its Friday morning report said, "A cold front will slide across the power pool [Friday] with a slight chance for a few showers. A brisk northwest wind behind this system will usher unseasonably cool high pressure and the coldest air of the season into the power pool during the weekend into the start of next week.
"A west-northwest wind behind the cold front will continue to support elevated wind generation today into early Saturday morning. Output is forecast to range 3-4 GW. Wind gen will decrease and become light during the weekend, but a moderating southerly flow will drive up wind gen output early next week. Output is forecast to climb back to near 4 GW."