Weekend and Monday natural gas rose in Friday's trading as both gains in power prices and warm weekend temperatures were forecast for a good section of the Midwest.
Gains in the Midwest and Gulf outdid softer markets in the Northeast, Rockies and California. The NGI National Spot Gas Average rose 5 cents to $2.13. Futures consolidated gains after Thursday's double-digit advance. At the close, July had fallen 6.1 cents to $2.556 and August had retreated 6.6 cents to $2.624. July crude oil shed $1.49 to $49.07/bbl.
Midwest quotes received a boost from strong next-day power pricing. On-peak Monday power at the Indiana Hub jumped $5.99 to $40.00, and peak power Monday at the PJM West terminal added $6.40 to $34.88/MWh.
Gas on Alliance gained 12 cents to $2.35, and deliveries to the Chicago Citygate also rose a dozen to $2.37. Gas on Consumers was quoted a dime higher at $2.36, and gas on Michigan Consolidated came in up 10 cents to $2.35.
The Tetco explosion in Southwest Pennsylvania knocked out service on a portion of Texas Eastern's (Tetco) Penn-Jersey Line in the M3 Zone more than a month ago (see Daily GPI, June 8), but observers don't see any major market disruptions although three pipelines still remain shut-in, limiting flows east of the Delmont Compressor station. The blast occurred off State Route (SR) 819 in Westmoreland County's Salem Township, about 30 miles east of Pittsburgh, on a section of the system where four pipelines run parallel to one another.
"I don't see any major market disruptions because of that," said a Houston-based pipeline veteran. "I'm sure Tetco is trying to make it work as quickly as they can.
"It's hard, though. What happens is that inspectors and those types all come in and say 'you had a rupture here, so everywhere around here, 400 miles this way, 400 miles that way, (or whatever it is), you are going to be looked at.' You are going to assume there are problems everywhere else.
"There's pockets of deliverability [issues] and point-to-point stuff, but in general most of the economic routes are all full. The pattern is full," he said.
Other market hubs were steady to higher. Gas on Dominion South changed hands at $1.53, up a penny, and parcels at the Henry Hub changed hands a dime higher at $2.41. Deliveries to El Paso Permian were flat at $2.12, and gas at the PG&E Citygate added two cents to $2.36.
Even with a down day Friday, futures traders were upbeat. "Probably older shorts are done and newer longs are in there, and they are in a good place," said a New York floor trader. "As soon as the temperatures heated up, that was enough to turn it around.
"Probably $2.64 is the next resistance point and above that $2.69. If traders can close the market in the $2.60s on a pullback the next time we are above $2.58, longs will stay in, otherwise they will pull out."
Fundamentals analysts are keeping an eye on the weather. "While some of this [storage] difference from most forecasts may have been holiday-related and could see some offset in next week's report, the downsizing was large enough to suggest a bigger than anticipated coal-to-gas displacement, some lift in exports and a softer production than generally perceived," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients. "But while considering such possibilities, we still feel that weather forecasts will continue to rule over the short term.
"While updates are looking less bullish than was the case 24 hours ago, CDDs still look higher than normal and should facilitate additional injections significantly downsized from normal and particularly reduced from a year ago. The market is already looking ahead to next week when current hot temps will likely show another contraction in the supply surplus in furthering a trend that could prove sustainable through much of the summer."
Technical analysts see natural gas poised to advance another 25 cents but caution that the market is within a seasonal peaking window. "With $2.493-2.568 offering only minor resistance, the door is now open for a further advance to $2.763-2.854-2.870," said Brian LaRose, a market technician with United ICAP.
"This next area of contention represents the 0.236 retracement of the $6.493 to 1.611 decline and 1.618 (A)=(C) up from the 1.611 low. Note, we strongly recommend keeping a very close eye on the rest of the petro complex for evidence of a seasonal top. Natgas could easily follow."
Gas buyers with the responsibility for procuring supplies for weekend power generation across the Southern Power Pool will have to balance warm humid temperatures but also solid wind generation. "A midsummer-like pattern is expected," said forecaster WSI Corp. in a Friday morning report. "An upper-level ridge and southerly wind will support above-average heat during the remainder of the week into the weekend, though an isolated thunderstorm cannot be ruled out each day. High temps will likely top out in the upper 80s and 90s across the entire power pool, [and] humidity levels will gradually creep up and push heat index values up into the 90s to low 100s.
"A weak frontal boundary and an upper-level low ejecting out of the Rockies will support an increasing chance of rain/storms late Sunday into early next week, likely causing the heat to relax. A south-southwest wind will support elevated wind generation during the forecast period. Output will likely peak at 6-9 GW."