Physical natural gas for Tuesday delivery was driven higher by forecasts of heat and humidity in large eastern markets, and other market points were quick to follow. Strength in the Northeast, Midcontinent, Appalachia and California was more than enough to counter soft pricing in East Texas, and the NGI National Spot Gas Average rose 5 cents to $2.79.
Futures rose as traders digested lean forecast storage builds in the weeks ahead but more moderate injections by September. At the close September had added 6.9 cents to $2.962 and October rose 6.2 cents to $2.992. The soon-to-expire September crude oil contract plunged $1.14 to $47.37/bbl.
Forecast heat and humidity along the Atlantic Seaboard helped keep a firm bid under next-day gas quotes. Accuweather.com forecast that Monday's high in Boston of 89 degrees would ease to 88 Tuesday, but adjusted for humidity Tuesday's high rose to 95. Wednesday's max was predicted to ease to 84, but the heat-index clocked in at an uncomfortable 89. The normal high for Boston this time of year is 79.
Philadelphia was just as uncomfortable. Accuweather.com said Monday's high of 85 would reach 92 Tuesday, but adjusted for humidity that came in at a sweltering 102. Wednesday's high of 86 resulted in a heat-index of 90, 5 degrees above normal.
Gas at the Algonquin Citygate rose 16 cents to $3.21 and gas on Dominion South rose 8 cents to $1.85. Gas bound for New York City on Transco Zone 6 was quoted 21 cents higher at $3.15, and gas on Transco Zone 4 changed hands at $2.93, up a penny.
Deliveries to the Chicago Citygate added 3 cents to $2.88, and gas at the Henry Hub came in 9 cents higher at $2.98. Gas on El Paso Permian was clocked at $2.60, up 7 cents and gas on Northern Natural Demarcation rose 9 cents to $2.79.
Next-day power prices were firm to higher. Intercontinental Exchange reported that on-peak power for Tuesday delivery at the ISO New England's Massachusetts Hub rose 45 cents to $46.62/MWh, but deliveries to the PJM West terminal added $3.62 to $42.80/MWh.
Traders are bullish on natural gas. "I am a scale-down buyer of natural gas," Alan Harry, trader and principal with Harry's RE Trust in New York told NGI. "One of the reasons I am so bullish is we are ending the summer with natural gas below $3, which means a lot of gas that could have been kept in storage or in the market is gone.
"I also see a lot of gas going out through LNG, and that will have an impact on natural gas this winter. We've been fortunate to have bearish weather, and if we had had bullish weather prices would have been much, much higher. The rig count is not increasing, and all that is going to make for a very tight situation when we need the natural gas.
"Right now I am a scale in buyer at $2.90 down to $2.78, and if it breaks $2.77, I would get out of all longs. I think we will hit $3.57 to $3.65 in the next two months.
Short term traders are a little more skeptical. "This market needs to trade above $3 and hold before we can see any real advance," a New York floor trader said. "Although there may be stops above $3, we have been above $3 on numerous occasions only to give up 15 cents."
The National Hurricane Center (NHC) in its 2 p.m. EDT report was following two Atlantic tropical systems. It said that activity has increased Monday in association with the remnants of Harvey, but the system still lacks a well-defined center of circulation. Some development of this disturbance is still possible before it reaches the coast of Belize or the Yucatan Peninsula early Tuesday. The system is forecast to move into the Bay of Campeche early Wednesday, where environmental conditions are expected to be conducive for redevelopment into a tropical cyclone. NHC puts the likelihood of tropical storm formation at 90%.
NHC said that a trough of low pressure over the central Bahamas could show slow development the next several days while it moves west-northwestward across the Bahamas and then turns northwestward or northward near Florida and the adjacent waters. It estimated the chance of becoming a tropical storm in the next five days at 40%.