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Northeast NatGas Market Gains As Power Loads Soar; Futures Slump

Physical natural gas for next-day delivery managed to inch higher in Monday's trading as hefty gains at Northeast points managed to offset otherwise weak pricing in the Southeast, Midcontinent, Midwest, Texas, and Louisiana.

The NGI National Spot Gas Average added 2 cents to $2.56. Futures moved in the opposite direction with September slipping 2.4 cents to $2.748 and October falling 3.0 cents to $2.779. September crude oil added $1.22 to $43.02/bbl.

Next-day gas into New York soared as power loads were forecast to jump and temperatures were expected at above normal levels. The New York ISO predicted Monday's peak power load into New York City would rise from 8,884 MW to 9,049 MW Tuesday and reach 9,603 MW by Wednesday. The PJM Interconnect forecast peak load system wide would jump from Monday's peak load of 44,274 MW to 49,773 MW Tuesday and make it to 50,385 MW by Wednesday.

Those power requirements weren't lost on gas buyers. Next-day gas on Transco Zone 6 NY rose 41 cents to $1.94 and deliveries on Transco Zone 6 non-NY North serving southeasternmost Pennsylvania, Trenton, and southern New Jersey added 29 cents to $1.89.

AccuWeather.com predicted New York City's Monday high of 85 degrees would rise to 86 Tuesday before sliding to 83 on Wednesday. The normal high in New York City in early August is 84. Philadelphia's high Monday of 86 was seen building to 89 Tuesday and 91 by Monday, five degrees above normal.

New England prices firmed as well. Gas on Algonquin Citygate rose 18 cents to $2.97 and packages at Iroquois Waddington were quoted a penny higher at $2.84. Deliveries to Tennessee Zone 6 200 L rose 17 cents to $2.94.

Prices at major hubs were mostly lower. Deliveries to the Chicago Citygate fell 2 cents to $2.74 and gas at the Henry Hub shed 2 cents as well to $2.83. Gas at Opal came in a nickel higher at $2.68, and parcels at the PG&E Citygate dropped 2 cents to $3.16.

Higher use of gas for power burn appear to be baked into the gas demand landscape. "We have some new plants coming on, and the ones we have have burned a lot of gas because of the weather," said a Houston pipeline veteran.

"Looking at the country overall with the number of conversions it makes sense that power burn will be higher than it was a year ago [normalized for weather]. The shoulder months should be less of a shoulder month comparatively, but it still depends on what is going to happen with weather, temperatures and demand."

Although peak hot weather may have been reached for the cooling season, forecasters see warm temperatures and elevated gas demand still in the mix. "No major changes in the overnight or mid-morning weather data as a very warm to hot pattern continues through mid-August, just with modest swings in nat gas demand every several days from slightly above normal to much above normal," said Natgasweather.com in a noon update. "Minor cooling from late this weekend remains over portions of the Great Lakes and Northeast. However, hot high pressure over the central and southern US, including all of Texas, continues to hold strong with daily highs of 90s to 100s expected.

"Hot high pressure will expand to cover the Great Lakes and East Coast as the week progresses with upper 80s and 90s into Chicago and major Northeast cities Wednesday through Friday. With very high humidity east of the Rockies, the Heat Index is expected to again reach well over 100+°F, focused over eastern Texas, the South, and up the Mississippi River Valley. The Heat Index will also approach 100F along the East Coast late in the week to aid strong demand for cooling."

Record-high natural gas power burn was the driving factor behind last week’s report of an unusual 6 Bcf summer natural gas storage withdrawal for the week ending July 29, according to the Energy Information Administration (EIA).

In a note published Monday (see related story), EIA wrote that, prior to last week, the most recent net withdrawal on a national basis in July occurred in 2006. Total inventories now stand at 3,288 Bcf, still 16% above the previous five-year average, according to EIA (see Daily GPI, Aug. 4).

Thus far, 2016 power burn has outpaced 2015, which was already a banner year for natural gas consumption for electric generation (see Daily GPI, April 5).

Hot weather aside traders see last week's decline in prices as weather driven. "After posting a high of $2.91 last week, natural gas fell back down to end the week at $2.772," said Mike DeVooght, president of DEVO Capital in a weekend note to clients. "The forecast for warmer weather has dissipated and the expectations for an increase in natural gas demand have decreased.

"On a trading basis, we will continue to hold our current short producer hedges. It is possible that the warmer than normal temperatures could help the market make another run at the $3 level. We would use rallies approaching the $3 level on the spot market as an opportunity to add to or initiate short producer hedges.

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