Buyers of natural gas for weekend and Monday saw little reason to take action Friday and spot gas prices took a double-digit hit.
All but a few points tracked by NGI were deep into double-digit losses with the Rockies and California points showing the greatest losses. The NGI National Spot Gas Average fell a stout 18 cents to $1.72. Futures made it to the upside, although June was unable to push past the week's high of $2.179 reached in Thursday's trading. At the close June had added 2.5 cents to $2.101 and July was up by five-tenths to $2.243. June crude oil rose 34 cents to $44.66/bbl.
Weekend and Monday prices in California plunged as limitations on storage backed up gas in Southern California and the Rockies. "SoCal is in an oversupply situation and they have called an OFO," said an analyst with Energy GPS, an Oregon-based power and gas consulting firm. "You will need to shut off imports from the desert Southwest and Rockies and change your pricing structure a bit in response to lower weekend demand.
"Weekend demand and renewables output is normal for this time of year, but given the limited flexibility of the system being unable to inject gas you have to back off imports. I would expect more volatility on the weekends with SoCal needing to call OFOs," the analyst said.
Weekend and Monday deliveries to Malin fell 21 cents to $1.72, and gas bound for the PG&E Citygate shed 16 cents to $1.96. Gas at the SoCal Citygate changed hands a hefty 29 cents lower at $1.87, and deliveries priced at the SoCal Border Avg. Average were quoted 24 cents lower at $1.74.
Other market points into California eased as well. Gas on El Paso S. Mainline dropped 25 cents to $1.74, and Kern River receipts were quoted at $1.66, down 23 cents. Opal came in 22 cents lower at $1.68.
Along the REX Zone 3 Expansion, the differential between producing zones and market zones narrowed somewhat as gas at Marcellus/Utica points gained ground relative to downstream interconnects.
At interconnects with several north-south pipelines carrying gas to the Midwest and Great Lakes prices retreated even more. Packages on REX Zone 3 at the interconnect with Midwestern Pipeline in Edgar County, IL, dropped 17 cents to $1.76 and gas at the Moultrie County, IL, junction with NGPL was seen 15 cents lower at $1.77. At the Panhandle Eastern interconnect in Putnam County, IN, weekend and Monday gas was quoted at $1.76, down 16 cents.
Futures traders suggested the firm June close might serve as a lift-off for higher prices in the coming week. "If we can hold $2.10, you may get an attempt to take out the $2.18 area," a New York floor trader told NGI. "$2.045 is a good hold point, and $2.101 is a good settlement."
Analysts are holding on to a bearish outlook. "This market is continuing to have difficulty following through in either direction as is often the case in the shoulder period when the weather factor subsides as a pricing influence," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients.
"Although another cold spell is expected to move into the Midwest region later next week, this supportive force is currently being negated by expected mild trends along the eastern seaboard. As a result, some upward acceleration in supply injections is expected beyond next week's EIA storage report that will likely offer a supply build similar in magnitude to yesterday's 68 Bcf increase.
"But contraction in the surplus is likely given some cold patterns during the first half of this week that saw some low overnight temperatures lifting CDDs. And while the nearby gas futures are entitled to some weather premium given the possibility of a late May hot spell, the market now appears to be discounting normal trends that have narrowed the differentials between June futures and lower-priced next-day Henry Hub values."
Across the MISO footprint forecasters were expecting only modest renewable generation through the weekend. "Fair and warm weather are expected [Friday]," said WSI Corp. in its Friday morning report. "High temps will range in the 70s and 80s, [and] a cold front will sag southward across the Midwest and Great Lakes as the weekend progresses with a round of showers and a few storms. This may lead to variable and changeable temperatures.
"A wave of low pressure will develop along the front and support a chance of showers and thunderstorms across the power pool early next week. Storms may be strong.
"A west-southwest to north wind associated with the cold front will likely support a pulse of wind generation today into Saturday. Output is forecast to peak 6-8 GW. Wind gen will subside during Sunday, but the next potential storm system will aid wind gen early next week."
The Labor Department reported that non-farm payrolls in April increased by 160,000, less than expectations of more than 200,000. The unemployment rate held steady at 5%, and the increase was the lowest since September.