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NatGas Cash, Futures Hold Their Ground Before Low-Demand Weekend

Natural gas for delivery over the weekend and Monday, for the most part, managed to hold its own in Friday trading, despite of forecasts for lower energy usage.

Most market points outside the Northeast traded within a few pennies of unchanged, and in New England double-digit gains were noted as temperatures over the weekend were forecast to start the weekend well below normal.

The NGI National Spot Gas Average rose 3 cents to $2.93. May futures opened strong and made a valiant attempt to reach new high territory, but at the end of the day had to settle for a nominal setback. At the close May had eased one-tenth of a cent to $3.190 and June had given up three-tenths of a cent to $3.254. May crude oil tacked on 25 cents to $50.60/bbl.

Points in New England posted gains for weekend and Monday delivery, and in the Mid-Atlantic quotes held firm although energy usage was forecast to decline. ISO New York forecast that peak load Friday of 18,362 MW would recede Monday to 18,007 MW and peak load across the PJM grid was expected to fall from 33,701 MW Friday to 30,662 MW Monday according to figures from PJM Interconnection.

Gas at the Algonquin Citygate rose a dime to $3.72, and deliveries to Iroquois Waddington rose 3 cents to $3.39. Parcels on Tenn Zone 6 200L gained 40 cents to $4.33.

Gas on Texas Eastern M-3, Delivery added a penny, but gas bound for New York City on Transco Zone 6 shed 3 cents to $2.90.

Temperatures in the East were forecast well below normal but were seen rising close to seasonal norms by Monday. Midwest temperatures were seen at normal levels for most of the weekend. Forecaster Wunderground.com predicted that Boston's Friday high of 39 degrees would fall to 36 by Saturday before reaching 49 by Monday, 1 degree below normal. Chicago's Friday high of 41 was expected to jump to 57 Saturday before sliding to 53 Monday, right at the seasonal norm.

Most major trading centers posted gains. Gas on Dominion South added a couple of pennies to $2.81, but deliveries to the Chicago Citygate fell 6 cents to $2.94. Gas at the Henry Hub gained 3 cents to $3.10.

Out west, gas on Panhandle Eastern rose 6 cents to $2.70 and gas received on Kern River was quoted 3 cents higher at $2.65. Gas priced at the SoCal Citygate gained 9 cents to $3.09.

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The market opened trading 4 cents higher as overnight weather models turned cooler. "[Friday's] six-10 day period forecast is colder than previous forecasts over the eastern two-thirds of the CONUS, especially the Southeast," said WSI Corp. in its Friday morning outlook. "The western U.S. is a little warmer. As a result, CONUS GWHDDs are up 5.7 to 64.2, which are 9.4 below average.

"Even with today's colder changes, an amplified upper level pattern and deep eastern U.S. trough offers a cooler risk over the eastern half of the U.S."

Technical analysts are scratching their heads trying to figure out if Thursday's 4-cent setback in the May contract may signal a market top.

"As anticipated the May contract ran into trouble at $3.232-3.245-3.258, the 200 week MA and 0.618 of ‘a’=’c’ up from the $2.522 low," said Brian LaRose, a market analyst with United ICAP, in closing comments Thursday. "The question now, is a top brewing? Given Thursday's candlesticks and the divergence on the intraday technicals that is a scenario we must now entertain. However, bears need to crack $3.131-3.068 to confirm that is the case. Otherwise, the trend is still up."

Analysts focused on supply-side dynamics had plenty of additions to add to their drilling rig rosters. Five U.S. natural gas rigs returned to service during the week ending March 31, and 10 oil-directed rigs came back, according to Baker Hughes Inc. (BHI).

Gas buyers responsible for purchases for power generation across the MISO footprint may not have much in the way of wind generation available over the weekend.

"High pressure will nose into the power pool during the next two days," WSI said. "This will promote partly cloudy skies and variable temperatures. In general, max temps will range in the 50s to mid 80s. The next storm system will traverse the lower Midwest and Miss Valley during Sunday and Monday with a round of heavy rain and severe thunderstorms. Temps will retreat into the 50s-70s. Wind generation will decrease and become light during the next two days with some minor improvement by Sunday."

Tom Saal, vice president at FCStone Latin America LLC in Miami, in his work with Market Profile said to look for the market to test Thursday's value area at $3.221 to $3.185. "Maybe" the market will test the week's 100% breakout target at $3.286, he said in a morning report.

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