In spite of a potential doozy of a winter storm expected to impact the Midwest and Northeast later in the week, physical traders instead took guidance from power markets and at some points sent prices down by more than a $1. The NGI National Spot Gas Average tumbled 17 cents to $2.28, but eastern declines pushed a half dollar.
Prices in the Midcontinent slipped about a dime, but most other points eased just a few pennies. California on average added about a penny.
Just over a week ago February futures traded more than 30 cents higher, but in Monday's trading prices held their own, with February easing 0.9 cents to $2.091 and March giving up 1.9 cents to $2.108. Oil futures continued to probe new lows with February crude oil falling 96 cents to $28.46/bbl.
Gas headed for the Mid-Atlantic took the biggest tumble, and loads and next-day power prices gave gas buyers for power generation little incentive to lay in incremental purchases. Intercontinental Exchange said Tuesday power at the ISO New England's Massachusetts Hub fell $13.98 to $47.38/MWh and next-day power at the PJM West terminal fell $15.84 to $39.23/MWh.
Gas bound for New York City on Transco Zone 6 skidded $2.55 to $4.03, and deliveries to Transco non-NY North serving Marcus Hook, PA as well as Trenton and southern New Jersey fell $1.69 to $3.23. Gas on Texas Eastern M-3, Delivery, however, was flat at $2.69.
Further north, next-day prices also weakened. Gas at Iroquois, Waddington fell 57 cents to $2.82, and packages on Iroquois Zone 2 came in 45 cents lower at $4.01.
Power loads were also forecast to weaken. PJM Interconnection predicted Monday's peak load of 43,571 MW would fall to 42,361 MW Tuesday and 40,066 MW Wednesday. The New York ISO was expecting peak load Monday of 22,168 MW to ease to 21,561 MW Tuesday and fall further to 21,434 MW Wednesday.
The overall lower pricing environment came in spite of numerous restrictions and OFOs reported by Algonquin, Texas Eastern, Columbia Gas,Tennessee Gas Pipeline, Texas Gas Transmission and Transco. The pipelines were attempting to put protections in place ahead of an expected natural gas demand spike this Friday and Saturday, where much of the Mid-Atlantic and Northeast could find itself blanketed under feet of snow.
Physical prices may be able to make a recovery as the “biggest snowstorm of the winter season thus far is increasingly likely to hammer parts of the East late this week into the weekend with heavy snow, high winds and coastal flooding," said forecaster Wunderground.com.
"The big five cities of the Northeast corridor -- Washington, DC, Baltimore, Philadelphia, New York and Boston -- need to pay attention to the forecast this week as a high-impact storm with moderate to heavy snow and strong winds may affect one or more of those metropolitan areas from late Friday into early Sunday.”
Longer term weather models continue to call for relatively mild conditions out to the end of the month. In its Tuesday morning outlook, WSI Corp. said the latest 11-15 day period forecast
“depicts widespread above average conditions across the eastern two thirds of the nation. Near to below average temps are limited to the West.” Tuesday’s forecast “is not quite as warm as the previous forecast, [and] forecast confidence is average as medium range models are in good agreement with a sharp drop with the PNA and the pattern shift.
"The anticipated drop of the PNA [Pacific North American Pattern] supports a risk to the warmer side over the southern and eastern U.S. by the end of the period. The West and north-central U.S. could run colder."
Analysts said weather forecasts as losing their impact as market drivers as the market ventures on the downward side of the natural gas usage curve.
"The temperature factor will begin to lose pricing punch with next week's rollover to the March futures as prompt contract," said Jim Ritterbusch of Ritterbusch and Associates. "With the winter now in its advanced stage with mild views stretched into the beginning of February, production trends and a healthy supply surplus will be taking on greater focus. Unlike crude and oil, gas production is having some difficulty increasing back to above year ago levels.
"Furthermore, Friday's Baker Hughes rig count posted an unusually large drop in the gas rig count of 13 or almost 9%. On the demand side, the sharp price spike of late last month has had at least some impact on coal to gas switching.”
For Thursday's storage release, “we expect another larger than normal withdrawal but not one that is likely to reduce the storage overhang appreciably. As a matter of fact, the surplus of around 450 Bcf would appear secure through the rest of this month in keeping alive the possibility of an end of season stock of around 2.3 Tcf.
“Meanwhile, we see plenty of room for a renewed incursion of speculative capital into the short side despite an approximate 13,000 contract reduction in bearish length within latest COT reporting period."
Tom Saal, vice president at FC Stone Latin America LLC in Miami in his work with Market Profile expected the market to test last week's value area at $2.347 to $2.113. Saal said the market could test a second value area at $2.012 to $1.934 "depending on the weather."