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NatGas Cash Can't Get Out of Its' Own Way; Futures Steady Before Expiration

Natural gas deliverable Wednesday continued to grind lower in trading Tuesday, with broad losses in producing basins and Midwest market centers as well as California and the Rockies able to overwhelm modest market strength in the Marcellus.

The NGI National Spot Gas Average dropped 5 cents to $2.62. Weak next-day power pricing lent a soft tone to the markets, although the soon-to-expire October futures contract managed to hold its ground easing one-tenth of a cent to $2.996 and November lost five-tenths of a cent to $3.050. November crude oil plunged $1.26 to $44.67/bbl.

Next-day power pricing and weakening demand on the West Coast helped soften gas prices from Oregon to Southern California. Intercontinental Exchange reported that on-peak power at SP-15 for Wednesday delivery dropped $6.89 to $39.35/MWh and CAISO forecast that peak power load Tuesday of 39,914 MW would fall to 37,499 MW Wednesday.

Gas at Malin fell 6 cents to $2.85 and parcels at the PG&E Citygate came in 9 cents lower at $3.46. Gas at the SoCal Citygate dropped 16 cents to $3.08, and gas priced at the SoCal Border Average changed hands 9 cents lower at $2.95. Kern Delivery lost 13 cents to $2.93.

Mid-Atlantic points retreated as weak next-day power prices provided little incentive to make incremental gas purchases. Intercontinental Exchange reported that on-peak power at the New York ISO Zone A (western New York) delivery point fell $13.75 to $23.75/MWh and power across the state at the Zone G terminal shed $9.15 to $24.68/MWh.

Next-day power at the PJM West delivery point fell 83 cents to $29.97/MWh, and Wednesday on-peak power at the Indiana Hub came in $1.50 lower at $3.50.

Gas bound for New York City on Transco Zone 6 dropped under $1 at 98 cents, down 12 cents from Monday's trading, and gas on Transco Zone 6 non-NY North serving southeasternmost Pennsylvania, Trenton, and southern New Jersey skidded 11 cents to 93 cents.

Major market trading points weakened as well. Gas at the Chicago Citygate was quoted 3 cents lower at $2.96, and deliveries to the Henry Hub fell 2 cents to $3.03. Packages on Panhandle Eastern were seen 2 cents lower at $2.79, and gas at Opal changed hands 6 cents down at $2.81.

"With the weather factor declining in influence, the nearby gas futures are morphing into an even tighter trading range with today's parameters limited to less than 6 cents," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Tuesday. "The nearby futures gravitated at around the $3 mark with some possible assistance from today's option expiration. But tomorrow's futures expiry should prove to be more important and we see a firm finish given modest discounts on the screen against physical values and the likelihood that remaining speculative shorts will be rolling positions forward into the deferred premiums.

"Although the current Midcontinent cooldown is expected to be followed by another warm-up through the first week of October, seasonal factors are beginning to challenge CDD accumulation in demanding a major deviation from normal before prices are impacted appreciably. We are maintaining a neutral trading bias for now and will look to approach the market off of our previously suggested price parameters of about $2.95-3.17 in referencing the November contract."

Forecasters are not calling for much in the way of heating or cooling load. WSI Corp. in its Tuesday morning report said, "[Tuesday's] 11-15 day period forecast is cooler than yesterday's forecast across the Midcontinent for days 11-14. The West and parts of the Northeast are a little warmer. PWCDDs are down 0.9 for those days to 15.8 for the period. GWHDDs are up 0.8 to 17.7, which is nearly 20 lower than average.

"Forecast confidence remains on the low end of the scale due to uncertainty and model spread, with the long-range track and influence of 97L, as well as fluctuations with the upstream Pacific flow."

The National Hurricane Center (NHC) in a 2 p.m. EDT report said it was following a tropical wave 350 miles east of Barbados that was "showing signs of organization." The system had winds near tropical storm force and was moving to the west-northwest at 15 to 20 mph. NHC gave the system a 90% chance of becoming a tropical storm or tropical depression in the succeeding 48 hours.

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