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Long Weekend Pulls Plug on Physical NatGas; Futures Looking 'Soft'

Physical natural gas for delivery over the extended holiday weekend took a nose dive in Friday trading as traders saw no reason to commit to what amounted to a five-day deal. Double-digit setbacks were widespread and only a single point followed by NGI made it to the positive side of the trading ledger. The NGI National Spot Gas Average plunged 13 cents to $2.64.

Futures traders see a weak market but admit that forecast warm weather is likely to prop prices up and limit moves to the downside. At the close August had slipped seven-tenths to $3.035 and September was off six-tenths to $3.031. August crude oil jumped $1.11 to $46.04/bbl.

Energy demand at eastern locations was seen steady to lower over the extended holiday weekend. The New York ISO forecast peak load Friday of 25,715 MW would fall to 23,908 MW by Monday and rise modestly to 24,192 MW by Wednesday. The PJM Interconnection said Friday peak load of 49,613 MW would rise to 49,852 MW Monday and slide to 49,311 MW Wednesday.

Gas at the Algonquin Citygate fell 57 cents to $2.65 and deliveries to Iroquois Waddington dropped 12 cents to $2.91. Gas on Tennessee Zone 6 200 L skidded 50 cents to $2.60.

Major market centers were down by double-digits. Gas at the Chicago Citygate was quoted 16 cents lower at $2.67 and deliveries to the Henry Hub came in 6 cents lower at $2.94. Gas on El Paso Permian changed hands 19 cents lower at $2.44 and deliveries to the NGPL Midcontinent were seen 15 cents lower at $2.56.

Gas at Opal fell 16 cents to $2.44 and packages priced at the SoCal Border Average dropped 18 cents to $2.54.

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August futures opened a penny lower Friday morning at $3.03 as weather forecasts moderated and traders reacted cautiously to inventory data that was expected to drive the market higher.

"Natural gas is looking a little soft," said a New York floor trader. He hedged his bets somewhat and added, "I think we will get a lot more heat now, and you notice they put a little bit less in this week so the bullish [storage] numbers could stay.

"I do not think it will stay above $3, but I do like it at $2.90 to $2.92. I think it's a little sale here, but if you get a rally over $3.05 to $3.06, you have some room to the upside."

Ritterbusch and Associates senses that the market is sending off some bearish vibes given its inability to advance off of last week's seemingly bullish Energy Information Administration storage report that offered a smaller than expected 46 Bcf injection. In a morning report to clients it said while contraction in the surplus is likely to slow appreciably next week, the short term temperature views continue to favor additional contraction in the supply excess against 5 year averages of around 40 Bcf next month.

"This dynamic should prove sufficient to keep values supported above last week's lows of about $2.87 per nearby futures. However, our expected advance up into the 3.22-3.25 zone is being pushed back a couple of weeks as some moderation is beginning to show up in some of the weather views toward mid-month. All factors considered, we are still sidelined in this market in anticipation of some wide price swings in both directions with prices apt to post negligible change a couple of weeks down the road.

"For now, we will await price pullbacks into the $2.87-$2.92 zone to approach the long side for an investment type trade given what is shaping up to be a much smaller storage cushion with 2-3 months remaining in the” cooling degree day (CDD) “season. We are, however, keeping a hold on long Sept '17-short March '18 bull spreads."

Gas buyers for electrical generation throughout the vast PJM footprint over what could be an extended holiday weekend will not have much in the way of renewable power to work with should incremental purchases be necessary. WSI Corp. in a morning report to clients said a few storms may be locally strong. Despite the chances for storms, a southwest flow and partial, hazy sunshine will support seasonably warm/hot and humid conditions. Max temperatures will generally top out in the 80s to low 90s. Humidity levels will be elevated with dewpoints in the mid 60s to near 70. This will help hold min temps in the mid 60s to mid 70s.

"A southwest to northwest breeze will support modest wind gen during the next two days. Output will range 1-3 GW. Wind gen will subside and become relatively light and variable during Sunday into early next week."

In a longer time frame WSI said conditions had moderated just a touch. "The 6-10 day forecast is initially warmer. However, cooler changes were made to portions of the Plains and East during the back half of the period. The West is now even warmer.” Continental U.S. population-weighted CDDs “are down 0.9 to 62.5, which are 10.7 above average.

"Models are hinting at a more amplified flow, which supports some warmer risks over the western and central US. The Midwest and Northeast could run a touch cooler."

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