Physical natural gas for Tuesday delivery at many locations weakened in Monday's trading, but after the smoke cleared, broad average measures posted a gain.
Broad losses in Texas, Louisiana, the Rockies and California were offset by double-digit gains in the Northeast and Appalachia. The NGI National Spot Gas Average gained 4 cents to $2.57.
Futures trading was a different story, with early opening losses gaining traction and traders suspecting storage injections may continue into November. Market technicians, however, are seeing a complete price breakdown. At the close, November had fallen 16.2 cents to $2.831, and December had fallen 4.2 cents to $3.319. December crude oil shed 33 cents to $50.52/bbl.
"Natural gas is seeing additional selling as a follow-up to Friday's sharp drop as it looks as though storage injections will continue into the middle of November," said Citi Futures Perspective's Tim Evans. "The updated temperature forecast includes cooler temperatures for the current week that will add some heating demand, but this was offset by a warmer six-to-10 and 11-15 day forecast."
Others see a more catastrophic situation.
"First natural gas failed to clear the critical $3.380 hurdle, then it took a nose dive but held the key .236 [retracement]," said United ICAP's Walter Zimmermann in a midday report. "Monday gave a decisive break down below that .236 at the 2.950 level."
The day's sharp break in the November contract seemingly broke the back of the bulls.
"Is there any alternative wave count where there is still hope for natural gas bulls?" Zimmermann asked. "Not on a decisive daily close below $2.845."
Newly minted natural gas bears might want to heed the day's action in the physical market.
Titanic advances were seen at eastern points as forecasts called for cooler temperatures. Wunderground.com predicted Boston's high on of 60 degrees would drop to 49 Tuesday and 47 by Wednesday, 12 degrees below its seasonal norm. New York City's 63 on Monday was seen dropping to 52 Tuesday and 50 on Wednesday, 11 degrees below normal.
Gas at the Algonquin Citygate jumped $1.26 to $3.78, and gas at Iroquois, Waddington tacked on 54 cents to $3.16. Gas on Tennessee Zone 6 200 L rose $1.07 to $3.62. Deliveries to New York City on Transco Zone 6 added 80 cents to $2.10.
At other market centers, price movement was more benign. Gas at the SoCal Border Avg. fell 2 cents to $2.70, and deliveries to Opal fell 2 cents to $2.63. At the Henry Hub next-day gas fell 12 cents to $2.75, and gas at the Chicago Citygate was quoted 4 cents lower at $2.79.
Weather conditions didn't change much Sunday overnight, although some cooling has appeared in the East.
"Temperatures have cooled over the northeastern U.S. to open the new trading week as a reinforcing cool blast sweeps through Monday with highs of 40s and 50s," said Natgasweather.com. "Weather systems will also impact the West Coast with rain and slight cooling. Over the central and southern U.S., high pressure will dominate with warmer than normal conditions and highs of 70s and 80s. Another weather system will track into the Midwest and Northeast late this week with another round of showers and cooling for another modest surge in natgas demand, but still not exceptionally strong."
Next week, "temperatures will be above normal over the central and southern U.S. as high pressure dominates. Weather systems into West Coast and East will bring showers and near-normal temperatures. The trend is warmer than normal with the central and southern U.S. near normal."
Industry consultant Genscape Inc. sees a demand picture closely approximating that weather scenario.
"Lower 48 demand should be supported early in the week by cold in the Northeast and some cooling loads in Texas and the Desert Southwest, but will then retreat with mild temperatures blanketing the country by midweek," analysts said.
Genscape meteorological forecasts have New England and Appalachia population-weighted heating degree days (HDD) getting as high as nine HDDs above normal by Wednesday, then backing off for the remainder of the week.
"Those forecast temps push our New England demand forecast to a peak of 2.78 Bcf/d by Wednesday, then it falls to a low of 2.05 by Saturday. Appalachia follows a similar curve, topping out at 12.78 Bcf/d on Wednesday and hitting a low of 7.91 Bcf/d by Saturday. Midwest temperatures are forecast to be at to slightly-warmer than seasonal norms this week. While this holds our Midwest demand forecast fairly flat, we are watching for potential demand destruction from forecast heavy rains and possibly flooding in the upper Midwest states.
"Cooling loads may kick in along the Mid-Atlantic and Southeast markets as temps are forecast in the cooling degree day (CDD) range for most of the week. Similarly, Texas and Desert Southwest regional forecasts show CDDs in double-digits for the week."