Weekend and Monday deals for physical natural gas were a tough sell in Friday trading, although some modest strength was seen at New England, Mid-Atlantic, and Appalachian points.
Losses of a few pennies were common, and the NGI National Spot Gas Average fell 4 cents to $2.37. Both the March and April contracts settled on a firm note, but traders see a 16-cent premium to the expired March contract as susceptible to weather-driven weakness.
At the close, March had added a penny to expire at $2.627 and April was higher by 3.8 cents to $2.787. April crude oil retreated 46 cents to $53.99/bbl.
Increasing power loads and modestly higher Monday peak power helped support eastern price levels. PJM Interconnection reported Monday peak power increasing to 33,867 MW from Friday's 30,354 MW. Intercontinental Exchange said on-peak Monday power at the PJM West terminal rose $3.20 to $28.68/MWh.
Gas on Texas Eastern M-3, Delivery gained 11 cents to $2.13, and gas bound for New York City on Transco Zone 6 added 21 cents to $2.24.
Deliveries at the Algonquin Citygate came in 15 cents higher at $2.26, and packages at Iroquois, Waddington added a dime to $2.55. Gas priced on Tenn Zone 6 200L rose 7 cents to $2.36.
Otherwise, major market points softened. Gas at the Chicago Citygates was quoted a nickel lower at $2.53, and deliveries to the Henry Hub dropped 11 cents to $2.49. Gas on El Paso Permian shed 7 cents to $2.24, and Kern Delivery changed hands at $2.49, down 2 cents. Gas at the SoCal Citygate fell 3 cents to $2.84.
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Prices in New England may have firmed for the moment, but if weather trends continue, New England may see still warmer trends as well.
"A February remarkable for its long stretches of mildness steamed onward Thursday, with more all-time records for the month continuing to tumble across wide stretches of the U.S.," said Wunderground meteorologists Bob Henson and Jeff Masters. "The apex of the record-setting warmth expanded on Thursday from the Midwest into New York and New England.
"The polar jet stream and associated surface front that typically swings through the United States in late winter has been hovering close to the U.S.-Canada border, with intrusions of seasonally cold air into the central and eastern United States either absent or short-lived over the last few days. The air mass south of this boundary has been notably mild and humid, flowing northward after spending time atop sea-surface temperatures that are at record-warm levels for late February.”
"Western Atlantic basin SSTs are on fire!" tweeted hurricane forecaster Eric Blake on Thursday. "Easily warmest on record -- especially the Gulf of Mexico."
Futures traders noted a nominal increase in heating load in the near term.
Weather models overnight produced some modest cold going forward. "With so many false alarms this winter, it has become increasingly difficult to believe in colder periods, but the unusual situation of two straight days of model demand gains has earned some credibility on this upcoming briefly colder spell," said Matt Rogers, president of Commodity Weather Group, in a Friday morning report to clients.
"[Friday's] forecast is also weaker with next week's warmth at times for the Midwest, East and South, which gains some demand in addition to this now cold-sided Monday March 6 week. The more skillful European guidance managed to gain demand on both model cycles in the past 24 hours, but they still show warmer ensemble cluster subsets that offer risk to the outlook."
Given the overall lack of winter weather, traders aren't convinced the now spot April contract is likely to hold up.
"I could see us within the next week or so being closer to the $2.50 range than up here [$2.787]. There's no reason for this market to up close to $3," said a New York floor trader. "It's currently 70 in New York City and all next week they are looking for temperatures in the 50s.
Analysts see any significant price moves contingent upon colder weather, and it appears that a late-season trend to more normal temperatures is unlikely to be sufficient.
"Some models are beginning to favor temperature normalization across many of the northern tier states," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients. "But this is a market that will require broad-based below-normal weather outlooks if price advances of some 10-15 cents are to develop. This late stage of the heating cycle will also be reducing HDDs seasonally in reducing the impact of any cold temperature forecasts should they develop. As a result, we feel that any meaningful price increase will be heavily contingent upon an upswing in power demand and exports with the approach of the shoulder period."
Gas buyers for power generation across the PJM footprint over the weekend were expected to have a healthy amount of wind generation to work with.
WSI Corp. in a Friday morning report said, "A vigorous storm system and its associated cold front will track across the power pool from west to east during the next two days with a round of rain and thunderstorms. Severe thunderstorms and/or a squall line with damaging winds will likely track into western PJM this evening into tonight. The rain and storm risk will shift into the Mid Atlantic during Saturday.
"An increasing south-to-northwest wind associated with low pressure will lead to a period of strong wind generation during the next two days. Another pulse of southwest winds will continue to support elevated wind gen during Sunday. Output is forecast to peak 4-6 GW."