Physical natural gas for Tuesday delivery bounded higher in Monday trading aided and abetted by a strong screen as well as a firm next-day power market. Every point followed by NGI traded in positive territory, with the greatest gains reserved for the Northeast and Appalachia. The NGI National Spot Gas Average gained 17 cents to $2.57.
Futures recovered a portion of Friday's 9-cent drubbing, and even with the load loss in the Southeast prompted by Hurricane Irma, traders were reluctant to be sellers of natural gas with the winter heating season on the horizon. At the close October had risen 6.0 cents to $2.950 and November was up 5.4 cents to $3.019. October crude oil gained 59 cents to $48.07/bbl, and the Dow Jones Industrial Average booked its greatest gain in 6 months rising 259 points to 22,057.
The market was clearly looking past the Southeast demand destruction by Hurricane Irma, but that loss was extensive.
Total demand in Florida, Georgia, Alabama, and the Carolinas was down 3.26 Bcf/d between Thursday and Sunday, falling from 9.47 Bcf/d to 6.21 Bcf/d, although aggregate demand was up 118 MMcf/d for Monday, driven by a 205 MMcf/d gain in Georgia day over day, said industry consultant Genscape in a morning report.
"Despite many Florida residents evacuating north to Georgia and Alabama, demand in those states fell 1.05 Bcf/d and 325 MMcf/d respectively between 9/7 and 9/10. Between Sunday and Thursday, when drops began, aggregate demand averaged 9.99 Bcf/d, but as of 6 p.m. on Sunday, over 2.6 million homes were without power in Florida. Based on evening cycles, Florida aggregate demand fell from 4.43 Bcf/d on Sept. 7 to 2.74 Bcf/d on Monday, a drop of 1.69 Bcf/d."
Power demand accounted for most of the reductions, but is expected to be recovered once the storm passes, Genscape said. Power demand fell 1.66 Bcf/d from 3.94 Bcf/d on Thursday to 2.28 Bcf/d on Sunday. “Florida power burns averaged 3.98 Bcf/d in the 30 days before cuts due to Irma began. Drops in power demand have tapered off, only falling 30 MMcf/d day over day between Sunday and Monday.”
Gas at the Algonquin Citygate jumped 85 cents to $1.95, and deliveries to New York City via Transco Zone 6 vaulted $1.06 cents to $2.34. Packages at Tetco M-3 Delivery rose 36 cents to $1.20 and gas on Dominion South after having tested one-year lows on Friday gained 41 cents to $1.21.
Deliveries to the Chicago Citygate added 9 cents to $2.83 and gas at the Henry Hub was quoted 2 cents higher at $2.85. El Paso Permian gas came in 15 cents higher at $2.65, and packages on Panhandle Eastern rose 6 cents to $2.56.
Kern Receipts changed hands 7 cents higher at $2.65, and Kern Delivery rose 6 cents to $2.78. Gas at the PG&E Citygate rose 4 cents to $3.32 and deliveries priced at the SoCal Border Average gained a nickel to $2.75.
Firm next-day power prices made incremental purchases for power generation attractive. Intercontinental Exchange reported on-peak Tuesday power at the ISO New England's Massachusetts Hub rose $3.76 to $22.79/MWh, and power at the PJM West Terminal gained $4.07 to $30.15/MWh. Tuesday power at the Indiana Hub tacked on $4.52 to $30.60/MWh.
Futures traders saw the market continuing within its long-established trading range. "It was really pretty lackluster," a New York floor trader told NGI. "There was damage from the storm, but nothing that is going to affect long-term supply and demand.
"Looking ahead I think any extension lower into the $2.80s will be supported."
"[D]emand destruction outweighed [Harvey] production shut ins, which drove the market lower," said Mike DeVooght, president of DEVO Capital in a weekend note to clients. “...On a trading basis, we continue to look for natural gas to revisit the bottom of its recent range in the near future. We continue to stand aside for speculators and await or 'hope' for a more significant rally to re-establish producer hedges."
Forecasters see significantly warmer temps near term. "[Monday's] six- to 10-day period forecast is much warmer than Friday's forecast over the eastern two thirds of the Continental United States," said WSI Corp. in its morning outlook. "The West and adjacent portions of the north-central U.S. are much cooler.” Continental United States population-weighted cooling degree days (CDD) “are up 5.9 to 31.7, which are 5.2 above average.” Gas-weighted heating degree days are 5.4, WSI said.
"Even with the changes to the forecast, there are some warmer risks over the southern and eastern U.S. early in the period, while the upside risks shifts into the Mid Con late."
The National Weather Service (NWS) predicts above normal accumulations of CDDs for the week. For the week ended Sept. 16, NWS predicts New England will see 19 CDDs or 14 greater than normal, and the Mid-Atlantic should experience 25 CDDs or 10 greater than its seasonal norm. The greater Midwest from Ohio to Wisconsin should endure 16 CDDs or right at the seasonal average.