For just a four-day trading week there was enough activity to keep traders busy well into October. The NGI Weekly Spot Gas Average gave up the prior week's 14-cent gain to $2.77 and slipped 16 cents to $2.61 for the week ended Sept. 28, but things got really crazy early in the week when first-ever negative pricing was observed at congested Canadian points.
If that were not enough, a bullish storage report Thursday went unappreciated and spot futures skidded 4 cents after the market traded up on the day following the release of storage data.
The market point showing the week's greatest gain was Tennessee Zone 6 200 L with an advance of 12 cents to $2.45, and the week's greatest loser was NOVA/AECO C with a plunge of $C0.84 to just $C0.32/Gj.
Regionally, most sections outside Appalachia and the Northeast were down by a dime to 15 cents with the Rockies on the low end at $2.45 and the Southeast sporting a regional average of $2.99.
Appalachia shed 27 cents to $1.44 and the Northeast was off 24 cents to $2.51.
October futures settled at $2.974, up 1.3 cents from the settlement of the September futures.
Spot November futures were down 1.4 cents to $3.007 for the five-day trading week.
Tuesday trading saw the first occurrence of negative daily gas pricing. Western Canadian markets were entangled in a web of constraints, bottlenecks and stranded gas.
"At AECO you have all kinds of problems," said Jeff Richter, principal with EnergyGPS, a Portland,OR-based energy risk management firm. "There are all kinds of constraints going on that they need to shut off production. There are bottlenecks all over the place and they are stranding gas. That market point will have to send a price signal and three weeks ago $C0.45/Gj didn't do it so you had to go to $C0.25.
"If $C0.25 doesn't do it you have to go to $C0.05, and if that doesn't do it, you have to go to negative because everything is getting pushed back there from maintenance.
"GTN is having maintenance and that is going to push a half Bcf/d back into AECO, and intra provincial maintenance is going on. The last three weeks AECO has been getting hammered. They came out of it a little bit, but to send a negative price signal there just sends a signal 'I've got to turn you off'," said Richter.
Negative pricing is a first. "NGI began offering NOVA/AECO C pricing in March 2002. In the more than 15 years since, NOVA/AECO C has never before traded in the negatives. In today's trading, prices ranged from negative 29 cents to positive 55 cents $CDN/Gj averaging just 8 cents," observed NGI Market Analyst Nate Harrison.
Wednesday's activity saw the NGI National Spot Gas Average down 3 cents to $2.62, and October futures expired on a strong note. Traders, however, ascribed much of the strength to short covering rather than any new interest in holding long positions. At the close October had risen 5.6 cents to $2.974 and November had risen 6.1 cents to $3.061.
Market technicians following Elliott Wave and Retracement were seeing the bulls slowly losing their grip on the market, if they ever had it to begin with. The bearish argument, however, needed a lot of work. "Bears have two levels to break if they are going to revive the case for another round of fresh lows," said Brian LaRose, analyst with United ICAP in closing comments Tuesday.
He said the market had to breach $2.88 and $2.75, and if these levels are taken out "we will have no choice but to dust off the case for a visit to the 2.500 neighborhood. As long as the bulls can prevent the November contract from slipping beneath these levels bulls still have a shot at salvaging the case for a bottom."
In Thursday's trading both the physical market and futures took it on the chin as forecast drops in eastern energy requirements pulled the plug on market points from New England deep into Appalachia.
Only a couple of points followed by NGI traded in positive territory, and losses of a nickel to a dime in Texas, Louisiana, the Midwest and Midcontinent were easily swamped by double-digit declines in the Northeast and Appalachia. The NGI National Spot Gas Average tumbled 16 cents to $2.46.
The futures markets fared only slightly better as even supportive storage figures for the week ended Sept. 22 were unable to generate any kind of positive market response. The Energy Information Administration (EIA) reported storage injections of 58 Bcf, about 8 Bcf less than what traders were expecting, and November futures initially inched higher. Just before the 10:30 a.m. EDT report, November futures were hovering around $3.036, and following the release November futures rose to $3.081. By 10:45 a.m. November was trading at $3.069, up eight-tenths of a cent from Wednesday's settlement.
At the close November had fallen 4.4 cents to $3.017, and December was off by 3.4 cents to $3.184. November crude oil fell 58 cents to $51.56/bbl.
Traders had been looking for a larger storage build. Last year 49 Bcf was injected and the five-year average build for the week stands at 84 Bcf. ION Energy calculated a 60 Bcf injection and Wells Fargo was looking for a 70 Bcf build. A Reuters survey of 24 traders and analysts showed an average build of 66 Bcf with a range of +59 Bcf to +73 Bcf.
"We are trading the range, but we poked slightly higher, so I am favoring the upside," said Tom Saal, vice president at FCStone Latin America.
"The muted response is due to the fact we are trading a winter month in a shoulder month time frame. The market is trading the way it should. It was definitely a bullish number but the market has to work off last week's number [97 Bcf] which was 5 or 6 Bcf higher than expected.
"The economist in me says we are trading a shoulder month," he said.
As positive as the number may have seemed, it was only enough to nudge the market upward. "It's going to take a lot more than this [number] to move the market higher. At least we are solidly above $3," said a New York floor trader.
Inventories now stand at 3,466 Bcf and are 127 Bcf less than last year and 41 Bcf greater than the five-year average. In the East Region 15 Bcf were injected, and the Midwest Region saw inventories rise by 26 Bcf. Stocks in the Mountain Region were 5 Bcf greater and the Pacific Region grew by 7 Bcf. The South Central Region added 5 Bcf.
In physical trading Thursday forecast sharp declines in energy usage into the weekend made incremental gas purchases for power generation less attractive if not unnecessary. ISO New England forecast peak power load Thursday of 16,280 MW would drop to 14,140 MW Friday, and fall to 13,470 MW Saturday. The New York ISO predicted peak power load Thursday of 20,756 MW would subside to 18,445 MW Friday, and drop to 16,559 MW Saturday. At the PJM Interconnection Thursday peak power load of 36,577 MW was expected to slide to 32,385 MW Friday and reach 27,482 MW Saturday.
In the Mid-Atlantic gas tendered to Tetco M-3 Delivery fell 34 cents to $1.18 and parcels bound for New York City on Transco Zone 6 plunged $1.57 to $1.21. Gas on Dominion South shed 20 cents to 99 cents.
Gas at the Chicago Citygate was quoted 5 cents lower at $2.80 and deliveries to the Henry Hub came in down 3 cents to $2.92. Packages on El Paso Permian changed hands 7 cents lower at $2.39, and gas priced at Northern Natural Demarcation fell 7 cents to $2.67.
At Opal Friday gas fell 3 cents to $2.46 and gas on Transwestern San Juan shed 11 cents to $2.35. At PG&E Citygate next-day volumes came in 3 cents lower at $3.16 and gas at the SoCal Citygate changed hands 11 cents lower at $2.87.
Friday's trading for Sunday and Monday delivery followed in Thursday's footsteps and put in another decline. Outside of a few points in East Texas and the Northeast, losses from a nickel to a dime or more were common, and weakness in Texas, Louisiana, Appalachia, and the Southeast couldn't overcome localized double-digit strength in the Northeast. The NGI National Spot Gas Average skidded 5 cents to $2.41.
Futures trading couldn't hold a candle to the broad weakness in the cash market, and the November contract was held to a 5-cent trading range. At the close November had eked lower by 1.0 cent to $3.007 and December was off by three-tenths of a cent to $3.181. November crude oil rose 11 cents to $51.67/bbl.
A forecast of a sharp one-day temperature drop in the Northeast sent Sunday and Monday quotes soaring. Wunderground.com forecast that Boston's Friday high of 65 would sink to 57 Saturday before recovering to 65 by Monday, 3 degrees below normal. Hartford, CT's Friday high of 68 was seen dropping to 58 Saturday and climbing back to 74 on Monday, 5 degrees above normal.
Intercontinental Exchange reported on-peak Monday power at the ISO New England's Massachusetts Hub rose $1.68 to $24.09/MWh.
Elsewhere eastern quotes sagged for the first two days of October deliveries. Gas at the Algonquin Citygate shed 3 cents to $1.67 and parcels priced at Tetco M-3 Delivery fell 13 cents to $1.05. Gas on Dominion South gave up 24 cents to 75 cents.
The National Weather Service in southeast Massachusetts reported that a fast moving low pressure system "will bring a round of showers and unseasonably cool temperatures late tonight into Saturday. Large high pressure will follow with dry weather and cool nights and mild afternoons Sunday, Monday and Tuesday. As the high drops south of our region, dry weather will continue but with unseasonably warm afternoons Wednesday and Thursday.
Gas at the Chicago Citygate was quoted 8 cents lower at $2.72 and deliveries to the Henry Hub shed 3 cents to $2.89. Parcels on El Paso Permian fell 8 cents to $2.31 and gas on Panhandle Eastern changed hands 8 cents lower at $2.41.
Forecasts Friday showed a slight cooling in the West but otherwise continued above normal temps in the Midwest and East. "The forecast features cooler changes in this period from the Interior West/Rockies to the Midwest, with this being a result of model trends in deepening a trough over the region late in the period," said MDA Weather Services in its morning six- to 10-day report to clients.
"Confidence, however, comes down from yesterday's levels as model spread has increased, particularly in the Midwest and not only between models but also within each model's ensemble members. The forecast now leans on the warm side of the Euro model, but like that model features broad above and much above normal coverage across the Eastern Two-Thirds. Belows are limited to parts of the Interior West."