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NatGas Cash, Futures Inch Lower; December Drops 6 Cents

Physical natural gas for Thursday delivery shed a couple of cents across the country with the exception of the Rockies and in California, where most points managed to stay in the black. TheNGI National Spot Gas Average declined a penny to $1.99.

Futures gave back Tuesday's gains as forecasters were having a hard time digging up any significant cold air capable of moving the market. At the close, December fell 5.7 cents to $2.263, and January shed 3.2 cents to $2.452. December crude oil tumbled $1.28 to $42.93/bbl.

Mild weather and full storage are prompting some to sell gas back to the market.

"We are just hoping we don't have to sell any more gas back this month," said a Great Lakes marketer. "If we did, it would not be at a good price."

One client uses gas for drying grain, and in the Great Lakes region conditions have been dry and there hasn't been the need to dry grain. "I guess he's going to have to eat some gas on this one," the marketer said.

Gas on Alliance for Thursday delivery fell 4 cents to $2.14m and deliveries to the Chicago Citygate eased 2 cents to $2.16. Gas on Consumers changed hands a nickel lower at $2.15m and gas on Michigan Consolidated was quoted at $2.14, down a nickel as well.

The extended maintenance on Algonquin Gas Transmission is coming to an end and with it, prices rose at the downstream end aided by a supportive next-day power market. Intercontinental Exchange reported that next-day peak power at the ISO New England's Massachusetts Hub gained $4.06 to $34.39/MWh.

Gas at the Algonquin Citygate added 32 cents to $2.69 and deliveries to Iroquois, Waddington shed 7 cents to $2.16. Gas on Tenn Zone 6 200L gained 34 cents to $2.64.

Industry consultant Genscape Inc. said effective Wednesday gas day "Algonquin Gas Transmission (AGT) has partially lifted operational capacity restrictions at Stony Point and Oxford compressor stations by 520 MMcf/d and 129 MMcf/d, respectively. Both compressor stations have been under significant limitations as a part of AGT's DOT pipeline integrity project.

"Since October 27, Stony point has been restricted by at least 820 MMcf/d and current operational capacity at Stony point is 1,100 MMcf/d and will receive an additional uptick" on Friday (Nov. 13) to 1,350 MMcf/d. "Timely nominations for [Wednesday's] gas day indicate throughput flows have jumped nearly 360 MMcf/d to 973 MMcf/d day over day."

In the Mid-Atlantic, prices fell as next-day power prices eased and demand was anticipated to weaken to the end of the week. Intercontinental Exchange reported next-day on-peak power at the PJM Interconnection fell $1.57 to $29.92/MWh. Forecast peak loads were also expected to decline by Friday from Wednesday's 32,675 MW and Thursday's 32,712 MW to 31,730 MW.

Next-day gas on Texas Eastern M-3, Delivery lost 3 cents to $1.20, and gas bound for New York City on Transco Zone 6 skidded 11 cents to $1.53.

Futures traders are frustrated.

"This market is a tough nut to trade. It's like climbing a mountain, the rocks fall under your feet and you just slip down," said a New York floor trader. "You have some small support at $2.18 and $2.20, but if the number comes out Friday and is bearish, look out below."

Early estimates of the Energy Information Administration's Friday storage report, released a day late because of the Veterans Day holiday, range from 41 Bcf to as high as 78 Bcf. Estimates seem to centering around a low 50 Bcf increase.

Overnight weather models Wednesday moved in the direction of milder temperatures in the key energy markets of the Midwest and East.

"The next five days saw some additional cooler tweaks across the Midwest and East at times, but the bulk of the changes skewed in the warmer direction for the next two weeks," said Commodity Weather Group's President Matt Rogers said in a morning report.

"The warmer changes begin early next week and extend through the six-10 day. Highs are again expected to push up into the 60s for the East Coast cities, while 50s are a little more common in the Midwest. The South, meanwhile, remains stormy. This led to some slight cooler changes for Texas, though with an upper-level low wobbling through, the details are still uncertain.

"Looking out to the 11-15 day, the models remain in relatively good agreement on a warm East and cool West. While the GFS [Global Forecast System] leans a little cooler, our preferred outlook hedges toward the warmer European, which resulted in some additional warming of the East Coast again... The continued model agreement, however, did inch up confidence," said Rogers.

Market technicians versed in Elliott Wave and retracement analysis expect little change in the trading landscape, and unless certain conditions are met, prices are likely to trend lower.

"No change," said United ICAP market technician Brian LaRose in closing comments Tuesday. "$2.441-2.484 represents the highest levels consistent with any wave four correction in a continuing five-wave decline from the $3.102 high. $2.723 represents the highest level consistent with any wave two correction in a subdividing five-wave decline from the $2.934 high. [We] see a breach of these levels as the only way to void our bearish models. Until then, the trend is down."

The near-term market may be problematic for some, but longer term the outlook is positive. The International Energy Agency forecast Tuesday in its World Energy Outlook 2015 that by the mid-2020s, coal will be supplanted by natural gas as the largest source of U.S electricity generation and by the mid-2030s, gas will overtake oil as the most utilized fuel in the nation's primary energy mix. (See Daily GPI, Nov. 10). According to the report, the worldwide outlook for natural gas supply and demand mostly is optimistic, but concerns about methane emissions and their impact on the environment are growing.

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