Natural gas for Tuesday delivery gained ground in Monday's trading as double-digit jumps in the East along with strong performances in the Rockies and California were able to offset soft Midwest and Gulf pricing. The NGI National Spot Gas Average rose 6 cents to $1.85, but gains in the East were well past 20 cents.
After a strong performance Friday June futures reversed course and gave up 13.6 cents to $2.042. July fell 10.4 cents to $2.218. June crude oil fell with the rest of the petroleum complex and skidded $1.14 to $44.78/bbl.
The effects of a Tetco Pipeline rupture and explosion Friday in western Pennsylvania continued to rattle through the markets.
The blast and subsequent fire were reported Friday at about 8:30 a.m. EDT on Tetco's Penn-Jersey Line in the M3 Zone, toppling trees, razing one house, damaging others and sending one resident to the hospital with severe burns (see Daily GPI, April 29).
Flows were immediately affected, pushing up M3 Deliveries basis by 9.8 cents in Friday trading to minus 54.5 cents from minus 64.3 cents for a 15.2% gain on the day, according to NGI data (see related story).
Prior to Friday, prompt Tetco M3 Delivered basis had averaged minus 65.7 cents during April trading, said NGI Markets Analyst Nate Harrison.
Gas had to be re-routed "In that area gas is likely flowing both directions, north and south and depending on the receipt points it may have stranded some Tetco M-2 Receipt gas," said an industry veteran. "I'm sure there is no shortage of gas to make its way up there."
"Other than Transco gains in that area, the Tetco M-3 rises are well above the norm in the East. Transco probably had to fill in the gaps caused by that gas not being there as well."
Next-day deliveries on Tetco M-3 added 26 cents to $1.66 and gas headed for New York City on Transco Zone 6 rose by 44 cents to $1.89.
Prices also firmed further downstream of the rupture and explosion. Gas at the Algonquin Citygate added 20 cents to $2.55 and deliveries to Iroquois Waddington rose 6 cents to $2.23. Packages on Tennessee Zone 6 200 L jumped 23 cents to $2.52.
Forecast cooler temperatures also aided the cause of higher prices at eastern points. Forecaster AccuWeather.com predicted the Monday high in Boston of 51 would hold steady Tuesday and rise to 53 Wednesday. The normal high this time of year is 62. New York City's Monday max of 58 was seen for Tuesday as well and easing to 57 by Wednesday, 10 degrees below normal.
Moves at other market hubs were more benign. Deliveries to the Chicago Citygate gained 3 cents to $1.97 and gas at the Henry Hub was unchanged at $1.91. Gas priced at the SoCal Border average rose 5 cents to $1.85 and deliveries to El Paso Permian changed hands 6 cents higher to $1.79.
Analysts see a more bullish tonality to the market but at the same time see something of a cat-and-mouse game in play.
"The market is getting more bullish on natural gas, thanks to what seems to be improving supply and demand fundamentals," said Nicholas Potter, an analyst with Barclays Commodities Research. "Calendar 2017 has gained 20 cents/MMBtu since the start of the year. However, investors have been more cautious further out on the curve (2018-2020). With producers waiting in the wings to hedge their future production volumes, potential buyers seem reticent to fund producer growth now, only to find a potentially oversupplied natural gas market once again by 2018."
Risk managers are keeping their powder dry for the moment. "Over the past few weeks, the gas market has been working higher, especially the deferreds," said Mike DeVooght, president of DEVO Capital Management, in a weekly note to clients. "We continue to see a decline in open interest, which indicates that the funds, which have been carrying a large short position for quite some time, are starting to liquidate their positions.
"Natural gas will most likely be in a holding pattern until we get closer to the summer cooling season. If we get warmer than normal temperatures early in the season, we could move back into the mid-$2 range. On a trading basis, we will continue to stand aside and await further developments."
DeVooght does suggest for physical market longs to sell the remainder of the April-October strip at $2.70 should the opportunity arise. Friday the strip settled at $2.379, however, according to DeVooght.
Early power generation demand in the Southeast looks like it's off to a strong start. "Residents of the southeastern United States may feel like the calendar has flipped ahead to Memorial Day, with warm and muggy weather in place for the start of May," said AccuWeather.com meteorologist Kristina Pydynowski.
"A predominantly southerly flow will set up across the Southeast into Monday, [and] moisture will pick up from the warming Gulf of Mexico waters and move into the region, bringing high dew points. Highs in the 80s will dominate the Southeast from Florida to North Carolina on Monday. Many areas in central Florida will crack the 90-degree mark." Highs in early May typically range from the middle 80s in central Florida to middle 70s in North Carolina, AccuWeather said.