Physical natural gas for weekend and Monday delivery was mostly firm in Friday's trading as multi-dollar gains in the Northeast more than countered losses in California and widespread though more modest gains at most other market points.
The NGI National Spot Gas Average added 6 cents to $2.18, and the East on average rose close to 30 cents. Futures were a different story, as the technical picture weakened significantly and weather forecasts moderated. At the close, December had shed 13.1 cents to $2.145 and January was off 12.1 cents to $2.291. The expired December crude oil contract fell 15 cents to settle at $40.39 after trading below $39.00.
Market technicians were eyeing a short-term uptrend line in place subsequent to the expiration of the November contract in late October. Friday's price action breached that trend line, leading observers at the very least to conclude that any meaningful price advance had been deferred.
Jim Ritterbusch of Ritterbusch and Associates said a large portion of the day's decline "appears technically related as a chart uptrend line that has stretched across this month was violated. Meanwhile, the short-term temperature views that are now stretching well into the first week of December have shifted back toward the bearish side in reinforcing many opinions of an El Nino-induced mild winter," he said in a note to clients.
"A significant cold spell across most of the Midcontinent during the upcoming weekend has been priced in, and we feel that this cool-down will be forcing the first storage withdrawal of the season when next week's EIA report is released. However, any decline should prove minuscule, with supply remaining elevated near a record 4 Tcf. Although this storage peak has proven smaller than we had expected just a few weeks ago, the market appears to be shifting focus toward the demand side where the late stage of the shoulder period has been favoring mild temperatures that could well extend into next month based on this week's updates."
Market bulls discounting El Nino might not want to fool with Mother Nature. Meteorologists at Wunderground.com said, "Sea surface temperatures in the eastern tropical Pacific are on par with the strongest El Nino events on record (1982-83, 1997-98). The National Oceanic and Atmospheric Administration (NOAA) projects this El Nino to peak during the Northern Hemisphere winter 2015-16 before transitioning to neutral conditions by mid-2016.
"The weekly sea surface temperature reading, taken within the Nino 3.4 region near the equator, has risen to 3.0 degrees C above average. This is the highest weekly value observed during any El Nino event in NOAA's records. This week's reading beats the highest weekly departure of 2.8 degrees C recorded in late November 1997 during the record-setting 1997-98 El Nino."
Following Thursday's storage report, traders were forced to recalculate balances. Tim Evans of Citi Futures Perspective sees a modest 7 Bcf build reported next week and the beginning of substantive draws beginning the week of Nov. 27. "Strong storage withdrawals in the weeks to follow will reduce the year-on-five-year average storage surplus back to 181 Bcf as of Dec. 4.
"There is a reasonable chance that some of the cold from the week ending Dec. 4 will carry over into the following period. In fact, if the jet stream is to stabilize, this weather pattern could persist for several more weeks, catching a market anticipating a warmer than normal winter by surprise.
"The market's failure to rally on the moderately bullish storage surprise suggests we should brace for a further test of the downside, but we continue to view the arrival of stronger seasonal heating demand as more consistent with a short-covering rally back toward the $3.00 level in the weeks ahead. From a fundamental perspective, we think the market has reached a juncture where the lower the price goes, the more bullish we'll become."
Gas buyers for weekend power generation across the MISO footprint may have to pick up the pace as forecasts call for cold temperatures and at best variable wind generation. WSI Corp. in its Friday morning report said, "Seasonably cold conditions are expected [Friday]. However, a wave of low pressure will slide across the lower Midwest through the Great Lakes late in the day through Saturday with a round of snow and rain. A swath of four to eight inches of accumulation is likely across Iowa, southern Wisconsin, northern Illinois, Indiana and Michigan. This system will usher a reinforcing shot of cold air into the power pool during the weekend. During this stretch, high temps will drop into the mid 20s, 30s and 40s and with lows in the teens and 20s.
"Changeable wind generation is expected. Wind generation will subside this morning, but low pressure will provide a boost tonight into Saturday. After a brief lull, a southwest flow may drive another spike during Sunday into early Monday."
In the physical market, weekend and Monday gas prices spiked just as Tennessee Gas Pipeline Co. LLC (TGP) on Friday filed its FERC certificate application for the Northeast Energy Direct (NED) Project. TGP said it would bring New Englanders relief from natural gas and power price spikes, but many of them have told the Commission they don't want it (see related story).
Some New Englanders aren't convinced the project is necessary. On Wednesday, Massachusetts Attorney General Maura Healey said NED and a competing project called Access Northeast, with a lower price tag of $3 billion and backed by Spectra Energy Corp., are not needed (see Daily GPI, Nov. 18).
Gas at the Algonquin Citygates vaulted $2.08 to $4.37, and deliveries on Tenn Zone 6 200L added 86 cents to $3.23. Packages on Iroquois, Waddington rose 4 cents to $2.36.
Mid-Atlantic points were mixed. Gas on Texas Eastern M-3, Delivery shed 2 cents to $1.64, and gas bound for New York City added 14 cents to $2.19.
With the exception of the West Coast, most market points firmed. Gas at the Chicago Citygates added a nickel to $2.32, but gas at SoCal Citygate shed 16 cents to $2.37. Deliveries to the Henry Hub came in a penny higher at $2.16, and gas at Opal was unchanged at $2.14.