Physical natural gas for weekend and Monday delivery had few takers in Friday trading as traders were unwilling to commit to three-day deals when the demand outlook appeared soft.
With the exception of a few eastern points, most locations waffled within a few pennies of unchanged, and the NGI National Spot Gas Average eased 2 cents to $2.54. Futures were held within a 7-cent range, and at the close April had risen 2.3 cents to $2.827 and May had added 2.5 cents to $2.939. April crude oil rose 72 cents to $53.33/bbl.
Traders don't see much more upside. "I don't think the market will rise much more," said Alan Harry, principal with Harry's RE Trust in New York. "At best we get up to $2.90, and we may be close to the highs right now. Then we head back down.”
He added that Thursday's storage report was bearish and "it's just a little while before fundamentals take over. Now it's just speculators pushing the market up, and I don't think it has that long to go. I think we will see a low of $2.37 and after that, I am a buyer."
Traders are also trying to reconcile Thursday's bearish storage report with technical resiliency.
Longer-term weather models overnight turned colder. "[Friday's] 11- to 15-day period forecast is for a cold Midwest/East when compared to yesterday," said forecaster WSI Corp. in a Friday morning report to clients. "CONUS GWHDDs are up +10.2 to 79.1 for the period. Forecast confidence is considered below average as models are illustrating increased uncertainty in the pattern."
WSI said the European model is in conflict with the GFS (Global Forecast System). "The ECMWF (European) offers colder risks to the pattern under a flex of a midcontinental/southwest ridge late in the period, resulting in a transient cold shot over the Northeast...The forecast continues to hold with a warmer than average over the East, but we have begun to increase GWHDDs due to recent trends in the ECMWF"
Traders see something of a conundrum between prices that seem stubbornly in place and a supply situation that becomes more bearish with each passing storage report. "This market continues to hang out near the highs of the past couple of sessions following a show of support that extends back to about the middle of last week," said Jim Ritterbusch of Ritterbusch and Associates in a Friday morning report to clients.
"The ability of the market to hold value in the face of what appeared to be an unusually bearish EIA storage report is providing a bullish pricing portent. But we are not seeing enough shift in the short-term temperature views to force an adjustment in the expansionary surplus trends that were highlighted by yesterday's data. The surplus against five-year average levels has increased to almost 300 Bcf and will likely be expanding further by an additional 70 Bcf or more with next week's EIA release. And with reliable short-term forecasts soon to be stretched to the beginning of spring, any major temperature deviations from normal toward the cold side will likely be packing little pricing punch."
Gas buyers for weekend power generation across the MISO footprint could expect ample renewable energy to offset natural gas purchases. "Sharp cooling trend to seasonable levels [are] expected over the next few days, but another large warming trend [is] expected over the weekend," WSI said. "High pressure will produce fair conditions, yet seasonably cold temperatures to end the week. But another major warming trend is in store over the weekend, where high temps should rise back into the 50s-80s in through next week. Exceptional wind gen [is] in store over the weekend into early next week where output should rise and hover near 10 GW."
Not only do buyers have plenty of renewables generation to deal with but also noted that physical prices had an uphill battle in the form of weak power demand. New York ISO forecast that Friday's peak power load of 19,593 MW would give way to a forecast Monday peak of 19,391 MW. PJM Interconnection predicted that Friday's peak load of 36,185 MW would slide to 34,445 MW Monday.
Packages priced at Tetco M-3 Delivery rose a penny to $2.48, and gas bound for New York City on Transco Zone 6 rose 58 cents to $3.23.
The National Weather Service in New York City said that "a series of Arctic fronts move across the region, one this evening and another Saturday. High pressure builds in Saturday night and will be in control Sunday into Monday. A frontal system moves through mid week. A polar cold front may tracks across the area late week."
Weekend and Monday deliveries at major trading points traded mixed. Gas at the Chicago Citygate rose 1 cent to $2.66, and deliveries to the Henry Hub fell 8 cents to $2.51. Gas on El Paso Permian gave up 3 cents to $2.34, and packages priced at Opal added a penny to $2.41. Gas at the SoCal Border Avg. averaged $2.47, down a penny.