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Natgas Cash, Futures Continue to Part Company; June Adds 8 Cents

Physical natural gas for weekend and Monday delivery fell in Friday trading as traders felt comfortable with supply and didn't see the need to commit to three-day deals. Weakness in the Northeast, Rockies, and California was able to dominate somewhat firmer pricing in South Texas and Appalachia and the NGI National Spot Gas Average retreated 3 cents to $2.88.

Futures traders were somewhat surprised by the market's 8 cent gain. At the close June had added 8.0 cents to $3.266 and July had gained 7.9 cents to $3.350. June crude oil partially recovered from its Thursday price collapse and added 70 cents to $46.22/bbl.

Midwest markets were thrown something of a curve ball when Vector Pipeline announced a force majeure Friday morning. "Due to an incident in Lake County, Indiana, the Vector pipeline will be out of service effective immediately and until further notice," the company reported. "Scheduled quantities will be reduced to EPSQ at all receipt and delivery points effective for the Intraday 1 cycle of today's gas day, May 5, 2017. Updates for tomorrow's gas day will be posted as information becomes available.

"The incident is unrelated to the planned service outage. Further information will be posted as it becomes available," the company said.

Gas at the Chicago Citygate was flat at $2.96 and deliveries to Alliance shed 3 cents to $2.90. Gas on Michcon rose a penny to $3.04.

Other market centers were mostly lower. Gas at the Algonquin Citygate fell 8 cents to $3.01, and deliveries to the Henry Hub were flat at $3.07. Gas on Dominion South was unchanged at $2.75.

Parcels on Northern Natural Demarcation skidded 4 cents to $2.84 and gas on El Paso Permian fell 9 cents to $2.65. Gas at Opal was quoted 6 cents lower at $2.70 and gas priced at the SoCal Citygate retreated 7 cents to $3.12.

Futures traders weren't expecting the day's advance. "The advance has somewhat neutralized the selloff," said Tom Saal, vice president at FCStone Latin America in Miami.

"The market's next direction is 50-50, but I still have 2 value areas below and none above, so if I am leaning any way, I am leaning lower. The two value areas are $3.134 to $3.152 and $3.051 to $3.075."

"I'm not sure what caused the rally today. There was some big volume that came in around noon." He thought there might have been a weather update, but "weather this time of year is inconsequential, but people will trade off of it."

The market opened 2 cents higher at $3.21 as traders studied more extended cool temperature forecasts and tried to navigate a directionless market.

Traders are finding the natural gas market a tough way to make a buck. "This market remains frustrating to both the bulls and the bears as it has been unable to sustain a price move in either direction in almost a month," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients. "[Thursday's] seemingly bearish EIA storage report provided a case in point as an injection that was about 6 Bcf larger than anticipated exerted only moderate selling pressure that is being largely negated this morning. Some of today's support appears forthcoming from some adjustments to the one- to two-week temperature forecasts favoring much broader coverage of below-normal temps than generally predicted yesterday.

"The likelihood that next Thursday's EIA report will show a reduction in the surplus of as much as 20-25 Bcf is also spurring some buying interest. Regardless, making another run at this week's highs of $3.31 could prove arduous unless weekend updates suggest some major revisions toward the cold side. Otherwise, we will await a close to below $3.16 to force further decline to our targeted $3.05 area, a level that approximates current spot pricing at [Henry Hub]."

Gas buyers for weekend power generation across the ERCOT power pool will have little wind generation to work with at first, but as the weekend wears on renewables should ramp up sharply.

"Fair weather and a warming trend are expected during the weekend into early next week," said WSI Corp. in its morning forecast to clients. "Max temps will rebound into the 80s to near 90. Humidity levels will remain comfortable but start to creep up during Monday-Tuesday.

"Weak wind generation is expected [Friday]. Output is forecast to bottom out around 1 GW or less. A diurnally influenced return southerly wind will cause output to ramp up tonight into early next week and output is forecast to climb up 10-13+ GW. Plentiful sunshine will support ample solar through the majority of the forecast period."

Natural gas usage could soon see support from increased economic activity, if the most recent Labor Department data is any indication. In its 8:30 a.m. EDT release, the Labor Department reported non-farm payrolls rose by 211,000, which was more than the 190,000 forecast by economists. The unemployment rate fell to 4.4%. The Dow Jones Industrial Average rose 55 points to 21,007.

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