Physical natural gas for Wednesday delivery managed a small gain as firming prices at major market centers were able to counter eastern weakness.
Near-term temperature outlooks called for significant swings, and the NGI National Spot Gas Average gained 3 cents to $2.39. Futures managed a healthy rally, primarily on technical considerations, and at the close April had added 8.1 cents to $2.774 and May was up 9.1 cents to $2.870. April crude oil shed 4 cents to $54.01/bbl.
Major market centers showed small gains as temperature forecasts proved volatile. AccuWeather.com forecast that Tuesday's high of 58 in New York City would jump to 70 Wednesday and drop to 48 Thursday, 17 degrees above normal. Chicago's 60 high Tuesday was predicted to drop to 50 Wednesday and slide to 39 Wednesday, 1 degree below normal.
Gas at the Chicago Citygate rose 2 cents to $2.60, and packages at the Henry Hub were quoted at $2.51, up 7 cents. Gas on Northern Natural Demarcation added a nickel to $2.47, and deliveries to Opal gained 9 cents to $2.40. Gas at the SoCal Citygates changed hands 12 cents lower at $2.78.
Eastern points were mixed to lower. Deliveries to the Algonquin Citygate fell 2 cents to $2.16, and gas on Iroquois, Waddington gained 11 cents to $2.55. Packages on Tennessee Zone 6 200 L fell 10 cents to $2.17.
In the Mid-Atlantic gas on Texas Eastern M-3, Delivery fell a penny to $2.09, and gas headed for New York City on Transco Zone 6 gave up 4 cents to $2.05.
Futures traders saw a firm technical picture countering weak weather forecasts and expectations of a weak storage report Thursday. "The natural gas market is seeing what looks like a technical recovery after nearby April futures held above their $2.641 low trade from last week, but the temperature forecast looks warmer and less supportive than a day ago," said Tim Evans of Citi Futures Perspective. "Thursday's DOE storage report for the week ended February 24 also looks weak, with the early consensus running at just 3-5 Bcf in net withdrawals, a token draw far smaller than the 132 Bcf five-year average for the date."
Weather models overnight continued to moderate and heating requirements are expected to be below normal. "[Tuesday's] six- to 10-day period forecast is colder across the coastal East early, followed by large warmer adjustments during the second half of the period over the eastern two-thirds," said WSI Corp. in its Tuesday morning report to clients. "CONUS GWHDDs are down 11.9 to 79.5 for the period.
"Forecast confidence is considered average. Models show fair agreement with the large-scale pattern, though there is some uncertainty with how much temperatures cool off late in the period over the East."
The National Weather Service (NWS) continues to forecast well below normal heating load. For the week ending March 4, NWS predicts that New England will endure 177 heating degree days (HDD) or 56 fewer than normal, and the Mid-Atlantic states of New York, New Jersey and Pennsylvania are expected to have 169 HDDs, or 50 fewer than average. The greater Midwest from Ohio to Wisconsin is expected to see 180 HDDs, or 53 short of its normal seasonal tally.
Analysts see the market slipping lower and eventually resting at $2.50. "We see the April futures ratcheting even lower to the pre-expiration March lows of $2.52 within a one-week time frame where we will anticipate longer-term support," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients. "While the warm weather factor has been a definite bearish influence across this month of February, above normal temperature trends will begin to lose influence as the winter season winds down next month.
"Non-weather items such as power demand, import/export activity, production, nuke downtime, etc., will gradually be developing in the process of likely driving a base of support through the shoulder period. We feel that this support will be developing at around the $2.50 area across much of next month. However, the possibility of a significant price spike of much more than 20 cents is being sharply reduced as the storage surplus continues to increase in very large weekly chunks. As the surplus increases, the 2017 carrying charges will remain vulnerable to expansion into new wide territory with such a development encouraging additional production given the benefits of huge price premiums out to next winter with which to establish short hedges."