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Eastern NatGas Cash Buoys Physical Market, Futures Tumble 15 Cents to Five-Month Low

Next-day physical natural gas gained ground in Monday trading with a wide disparity between market zones and producing regions. Stout double-digit gains -- some approaching $1 -- in the Northeast and Appalachia were easily able to counter broader losses across the Midwest, Midcontinent, Texas, and Louisiana. The NGI National Spot Gas Average added 5 cents to $2.67.

Futures prices headed south, establishing a new five-month low while the cash market average headed north. A change in the weather models overnight signaled cooler conditions, and the market opened trading 9 cents lower. At the close September had dropped 14.7 cents to $2.794 and October had lost 14.7 cents as well to $2.834. September crude oil gained 46 cents to $50.17/bbl, the first close over $50 in over two months.

One only had to look at the temperature forecasts for key eastern markets to decipher surging prices along the Eastern Seaboard. AccuWeather.com forecast Boston's Monday high of 84 would rise to 85 Tuesday and Wednesday, 8 degrees above normal, and New York City's Monday max of 89 was expected to reach 90 Tuesday before slipping back to 88 Wednesday, 4 degrees above normal.

Gas at the Algonquin Citygate jumped 82 cents to $2.75 and deliveries to New York City via Transco Zone 6 rose 95 cents to $2.68. Gas on Tetco M-3 Delivery was quoted 27 cents higher at $1.91 and packages on Dominion South added 22 cents to $1.85.

Elsewhere gas at the Chicago Citygate was down a penny at $2.78 and packages at the Henry Hub shed 8 cents to $2.84. Gas on El Paso Permian changed hands 2 cents higher at $2.62 and parcels priced at Northern Natural Demarcation shed 2 cents to $2.70.

Kern River fetched $2.67, up 2 cents and gas at Malin was seen flat at $2.71. Gas priced at the SoCal Border Average rose 31 cents to $3.07 and gas at the SoCal Citygate jumped 35 cents to $3.50.

"The charts are saying we are in the fifth wave of a five-wave Elliott Wave pattern lower," said Elaine Levin, vice president at PowerHouse LLC, a Washington DC-based risk management and trading firm.

"Some of the technical measurements bring you another 30 cents lower, which would bring you back to the $2.50s, which represent the lows on a continuation chart going back to last September.

"I would caution that December 2017 is $3.09, December 2018 is $3.02 and the following December $2.91. If that were to flatten, it would indicate the bears have something to say," she said.

September natural gas opened 9 cents lower Monday morning at $2.85 as weather models turned cooler, sending estimated cooling load below seasonal norms. Overnight oil markets were mixed.

Overnight weather models turned sharply cooler. "[Monday's] six- to 10-day period forecast is significantly cooler than Friday's forecast over the majority of the continental United States (CONUS), except the Northwest," said WSI Corp. in its morning report to clients. "CONUS population-weighted cooling degree days are down 11.5 to 45.5 for the period, which are 7.7 below average.

"Forecast confidence is average as medium range models have come into reasonably good agreement with the development of an amplified pattern and influx of cool air into the eastern two thirds of the CONUS."'

Scott Shelton, broker analyst at ICAP Commodities expects this week to be "more of what we've been seeing lately" with the long range storage surplus taking another hit amidst strong demand.

The Intercontinental Exchange end-of-storage futures market has been active lately, and on Wednesday 200 trades went off between 3,768 and 3,790. "The 3,788-to-3,790 range had a huge cluster of trades around it. We note that the range is lower by about 5 Bcf each week for the past few weeks. This is a whopping distance from 4 Tcf," said Shelton.

"Nonetheless, if the weather peters out in the fall, as we think it might, and production remains robust, which we also think is a gimme, we could see one of the beefiest fall injection periods ever. The tally may not hit 4 Tcf, but 3.85 we see as a realistic mark, with record production through the winter.

Mike DeVooght, president of DEVO Capital noted that last week the market made a successful test of support at $2.85, and "the gas market was able to rally back to prior week's settlement levels. On a trading basis, we will hold current hedge positions and will stand aside for speculators," he said in a weekly report to clients.

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