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NatGas Cash Firm, Yet Futures Drift Lower

Natural gas for next-day delivery firmed in Monday's trading as steady to higher quotes in the Rockies, California, and East were able to offset otherwise soft markets in the Gulf, Texas, and Midwest. The NGI National Spot Gas Average gained 3 cents to $1.55, and average gains at eastern points passed 20 cents.

Front-month natural gas futures settled slightly lower after trading in positive territory and at the close April had eased three-tenths of a cent to $1.819 and May had shed one-tenth of a cent to $1.914. April crude oil retreated $1.32 to $37.18/bbl.

At Northeast points prices firmed as next-day peak power gained ground. Intercontinental Exchange reported that at the PJM West terminal Tuesday on-peak power rose $2.43 to $29.95/MWh and at the Indiana Hub next-day peak power rose $2.51 to $26.00/MWh. At the ISO New England's Massachusetts Hub next-day on-peak power rose 86 cents to $21.86/MWh.

Next-day gas at the Algonquin Citygate rose by 51 cents to $1.62 and deliveries to Iroquois, Waddington added a penny to $1.86. Packages on Tenn Zone 6 200L gained 43 cents to $1.62.

The appeal of moving gas out of the Marcellus into midwest markets via the Rex Zone 3 East-West expansion diminished as Marcellus market points rose, and midwest points in Illinois and Indiana retreated.

Next-day gas on Dominion South gained 17 cents to $0.99 and parcels on Tennessee Zn 4 Marcellus rose by 16 cents to 92 cents. Gas on Transco-Leidy Line was quoted 12 cents higher at 91 cents.

Gas at the Putnam County, IN junction with Panhandle Eastern fell a penny and gas on Trunkline at the Douglas County, IL interconnect fell 2 cents. Deliveries to NGPL in Moultrie County, IL shed a penny also.

Other major market hubs were mixed. Gas at the Chicago Citygate fell a penny to $1.77 and gas at the Henry Hub changed hands 4 cents lower at $1.68. Packages on Kern River gained a nickel to $1.52, and gas at the SoCal Citygate came in a nickel higher as well to $1.75.

Traders acknowledge that upcoming storage reports are likely to show wide swings from withdrawals to injections as the industry transitions into the shoulder season. One trader remarked that "we continue to see a consistent uptrend in the year-on-five-year average storage surplus as both a significant headwind opposing a further rally and a downside risk."

Observers considered last week's rise a result of short-covering. "We feel the strength is due to primarily short-covering, rallying in sympathy with commodities in general, especially the energy complex," said Mike DeVooght, president of DEVO Capital, in a weekend report to clients. "The EIA storage numbers [last] week showed a smaller than expected draw, but the news failed to stop the natural gas from rallying to new monthly highs. The warmer than normal weather is also giving the natural gas market some strength as demand for the cooling season is expected to be better than last year.

"On a trading basis we are standing on the sidelines for now."

Tom Saal, vice president at FC Stone Latin America LLC, in his work with Market Profile is looking for the market to test last week's value area at $1.788 to $1.698 before "eventually' testing $1.999 to $1.947 and $2.223 to $2.084.

Weather models overnight showed more variability but nothing likely to prompt any significant changes to the ongoing pattern of overbearing warmth and moderation. Commodity Weather Group in its Monday morning report said, "The pattern situation over the next two weeks is more complicated and chaotic as we have seen a lot of detail drift on the modeling this past weekend. "[T]he six-10 day is not very distinct with a near-normal lean in many areas.

"The upper level teleconnection indications favor a cooler risk overall to both periods with a main focus in the middle third of the U.S., but the European ensemble did manage to trend more notably warmer overnight for the 11-15 day, which is a reasonable risk given continued chances for undercutting Pacific energy that offers warmer westerly flow, too. None of these model options match the ferocity of the super-warming we have experienced over the month so far...However, at this very last-minute of the heating season, overall normal demand is diminishing fairly rapidly via climatology."

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