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Solid Mid-Atlantic, Marcellus Gains Offset Broader Weakness; NatGas Futures Back Towards $3

Physical trading of natural gas Monday for Tuesday delivery was something of a bumpy affair, with a number of market points showing losses of about a nickel, but a few double-digit gainers in the Marcellus and Mid-Atlantic pulled the day's average well into positive territory.

The NGI National Spot Gas Average rose 11 cents to $2.46. Traders in Marcellus and Mid-Atlantic gas got a boost from next-day power prices, but futures traders were looking longer term and saw below average heating requirements and sold. At the close, December futures fell 7.9 cents to $3.026 and January was down 6.8 cents to $3.195. December crude oil swan-dived $1.84 to $46.86/bbl.

Futures traders were optimistic $3 would hold. "I think it will hold around the $3 area," said a New York floor trader. "I think there are some longs right underneath the market here that are going to hold on and see if they can get another jump out of the market to see if they can cover some positions. Natural gas is doing its own thing, separate from crude oil."

Next-day gas prices in the Marcellus and New York City area were certainly doing their own thing as healthy advances in on-peak Tuesday power provided a foundation to make incremental purchases for power generation. Intercontinental Exchange reported that on-peak power at the New York ISO Zone G (eastern New York) delivery point rose $3.97 to $31.27/MWh and on-peak power at the PJM West terminal added $3.95 to $34.64/MWh.

Next-day gas on Tetco M-3 Delivery jumped 57 cents to $1.76 and gas bound for New York City on Transco Zone 6 added 82 cents to $2.08.

Marcellus points were also strong. Gas on Dominion South rose 39 cents to $1.52 and deliveries to Tennessee Zn 4 Marcellus gained 52 cents to $1.60. Packages on Transco-Leidy Line were quoted up 34 cents to $1.47.

Major market centers weren't too far behind. Gas at the Chicago Citygate changed hands a penny lower at $2.56, but parcels at the Henry Hub jumped 15 cents to $2.80. Gas on El Paso Permian came in 9 cents higher at $2.49 and deliveries to the SoCal Citygate vaulted 13 cents to $2.77.

Medium-term forecasts were still coming in milder than normal. WSI Corp. in its Monday morning report said, "[Monday's] 11-15 day forecast is a little warmer than Friday's forecast, except for New England and Texas. CONUS GWHDDs are down one for Days 11-12 and forecast to be 70.5 for the whole period. This is still 18.7 below average. Forecast [confidence] is average as models continue to highlight a positive PNA [Pacific North American] driven pattern, and there are typical technical differences throughout the period.

"A positive PNA offers a colder risk across the southern and eastern U.S. The West and north-central U.S. could run even warmer during much of the period,” WSI said.

Consistent with the longer-term forecast, the National Weather Service predicts below-normal heating requirements in major markets for the week ending Nov. 5. New England is expected to see 115 HDD, or 25 fewer than normal, and the Mid-Atlantic is forecast to experience 90 HDD, or 36 less than its normal seasonal accumulation. The greater Midwest from Ohio to Wisconsin is anticipated to endure 65 HDD, or 75 less than its normal tally for this time of year.

Bespoke Weather Services of Harrison, NY, sees the market "significantly more tight than we did last year at this time regardless, justifying the decent price rises year-over-year, but with December contract prices trading so far above cash prices something is likely going to need to give in the next couple of weeks be it a major cash rally or further selling of the December contract."

Those decent price rises have not gone unnoticed in the drilling and producing sector. Overall, five U.S. land-based rigs were put back in play during the week ending Friday, bringing the tally to 533 running. One rig left the offshore, making for a net U.S. gain of four to rest at 557 running. (see Daily GPI, Oct. 28). Two U.S. oil rigs left, but six natural gas rigs came back. The return of five horizontals and three directionals was offset by the departure of four vertical rigs.

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