Both natural gas physical and futures values vaulted higher in Monday's trading in spite of a lack of supporting fundamental factors. Most of the day's gains can be attributed to a strong screen and a sympathetic move with the petroleum sector, which has exceeded traders expectations.
The NGI National Spot Gas Average jumped 18 cents to $2.68. Gains were widespread and no point followed by NGI fell into the loss column. Futures opened slightly lower, but resumed the exuberance from last week's string of five straight gains and at the close November had risen 8.2 cents to $3.275 and December was higher by 6.3 cents to $3.454. November crude oil gained a stout $1.54 to $51.35/bbl.
Short term traders attributed the day's rise to short covering and renewed interest by funds and managed accounts.
A Midwest trader said he had been "whipsawed" trying to pick market entry points and was moving to the sidelines in the face of recent losses sustained on a short position.
Weather forecasters had nothing in their pocket to justify the day's rise. "The overnight and mid-day weather data didn't bring any surprises or trend colder to justify such a rally, and in fact, still looks relatively bearish the next 10-12 days but still with the expectation cooler air will gradually start pushing into the northern US the last week of October," said Natgasweather.com in a noon update. "Specifically, the new week has started slightly cool over the northeastern US in the wake of a cool front that swept through this past weekend. Across the central and southern U.S., high pressure now dominates with mostly comfortable temperatures of 70s and 80s, requiring limited nat gas demand, although near 90F over Texas."
Observers are expecting cooler temperatures to prompt only mild heating load this week. "Some semblance of heating demand will make its first appearance of the fall in eastern markets this week," said industry consultant Genscape in a Monday morning report. "Genscape [metrics] forecast shows national population-weighted temps moving into HDD territory for the first time in earnest this week, about two weeks later than normal.
"The bulk of the cooling will be in the Pacific Northwest (with HDDs forecast to run about 12 HDDs vs a normal of nine HDDs), Midwest, Northeast, and New England. Midwest HDDs will be front-loaded for today through Wednesday, then gradually ease with warming. Genscape's associated demand forecast has regional demand climbing to a peak of 9.54 Bcf/d by Thursday, then waning from there."
For the week ended Oct. 15 the National Weather Service also forecasts below normal heating and cooling loads for major energy markets. New England is expected to see 89 combined DD (degree days) or eight fewer than normal, and the Mid-Atlantic is set to experience 77 DD, or five fewer than its normal tally. The greater Midwest from Ohio to Wisconsin is expected to take on 68 DD, or 19 under its normal quota.
Market technicians see the market needing to clear some significant hurdles if it is to continue rising. "Break out? Or fake out?" queried Brian LaRose, a technician at United ICAP, in Friday closing comments. "The price action to start the week will be critical in answering that question. If a diagonal fifth wave is coming to an end, natgas should not be able to sustain a break above $3.380 intraday, and should by no means get above $3.299 on a closing basis. Exceed these resistance points and there is room up to $3.680, then $3.910."
Physical market prices had no trouble following the screen higher and then some in spite of mild temperature outlooks. Forecaster Wunderground.com forecast that the Monday high in New York City of 64 degrees would ease to 63 Tuesday and reach 65 on Wednesday. The normal high in New York is 66. Chicago's Monday max of 70 was expected to reach 73 Tuesday before sliding to 71 Wednesday. The seasonal high in the Windy City is 65.
The Marcellus was still held to less than $1. Gas on Dominion South vaulted 32 cents to 98 cents and gas on Tennessee Zn 4 Marcellus was quoted 27 cents higher at 93 cents. Deliveries to Transco-Leidy Line rose 30 cents to 99 cents.
Major market centers were also solidly in the black. Gas at the Chicago Citygate changed hands 12 cents higher at $3.00 and parcels at the Henry Hub rose 18 cents to $3.14. Gas on Panhandle Eastern added a dime to $2.80, and deliveries to SoCal Citygate jumped 24 cents to $3.20.