Physical natural gas for delivery Thursday fell on average 4 cents overall on Wednesday, with broad weakness across most trading points. Few points made it into the black, with Marcellus locations recording rebounds just shy of a dollar one day after reaching all-time lows.
A weak screen along with moderating temperatures at many metropolitan areas softened Northeast points by as much as double-digits and eastern locations were down by a nickel or more. Even dollar-plus gains in the ever volatile Marcellus failed to offset the pervasive red ink.
At the close of futures trading, October was down by 3.2 cents to $3.713, and November slipped 3.5 cents to $3.787. October crude oil jumped by $2.65 to $108.07/bbl.
Midcontinent marketers lamented an abundance of supply and were somewhat impervious to recent market strength. "There is just too much gas around," said an Oklahoma trader. He noted that crude oil at $108 was more than five times greater than natural gas on a Btu basis. "What are these guys smoking?" he asked.
Prices at Midcontinent points eased somewhat more than the overall market. Deliveries to NGPL Midcontinent Pool shed 9 cents to $3.63, and gas on Panhandle also was down about 8 cents to $3.52. At Northern Natural Ventura, next-day packages fell 6 cents to $3.77, while OGT gas for Thursday delivery shed 6 cents to $3.63. NGPL TX OK came in a nickel lower at $3.73.
Capacity-constrained Marcellus Shale points rebounded sharply from Tuesday's drubbing, when both Transco-Leidy Line and Tennessee Zone 4 Marcellus both produced all-time low averages (see Daily GPI, Sept. 18). Thursday packages on Transco-Leidy jumped 99 cents to $1.33 and Tennessee Zone 4 Marcellus next-day gas also jumped 99 cents to $1.35.
At New England points, next-day gas prices slipped by double digits with temperatures forecast to stay near seasonal norms. AccuWeather.com expects Boston's high on Wednesday of 71 may rise to 75 Thursday and 77 on Friday. The seasonal high for Boston is 71. Hartford, CT's 72 high was seen rising to 74 Thursday and 78 on Friday, ahead of the normal high of 75. Providence, RI's normal of 74 was one degree lower at 73, with expectations of 75 on Thursday and 78 on Friday.
The National Weather Service in southeast Massachusetts said "high pressure will gradually slide east of the region through the end of the week providing mainly dry weather and warming temperatures through Saturday. Expect a cold front to enter the region Saturday night/Sunday with some rain showers." Beyond, is "lots of uncertainty for next week as low pressure with tropical origins may develop over the Gulf of Mexico and then track northeast into the middle Atlantic region."
Quotes at the Algonquin Citygates slipped 14 cents to $3.83, deliveries to Iroquois Waddington fell about 4 cents to $4.07. Tennessee Zone 6 200 L next-day gas was seen at $3.82, down 11 cents.
Next-day power prices into the region eased. IntercontinentalExchange reported that peak power Thursday into the New England Power Pool's Massachusetts Hub fell $2.08 to $38.01/MWh.
Market bulls Thursday will be looking for an increase in the Department of Energy (DOE) storage report less than historical averages that may continue the run of higher prices. Last year, 61 Bcf was injected and the five-year pace stands at 74 Bcf. Analysts at United-ICAP calculate a 52 Bcf build, and a Reuters poll of 24 market pundits expect an average 56 Bcf increase. Industry consultant Bentek Energy calculates a 47 Bcf injection.
In its 2 p.m. EDT report on Wednesday, the National Hurricane Center (NHC) said Tropical Storm Humberto was in the central Atlantic and heading north. The NHC is also following a broad area of low pressure centered over the western Yucatan that was given an 80% chance of developing into a tropical cyclone in the next five days.
Weather forecasts came in cooler Tuesday night. MDA Weather Services in its Wednesday morning six- to 10-day outlook said, "The East Coast has cooled a bit since [Tuesday], while the Upper Midwest has warmed slightly. The cool look in the West is generally on track, with only very minor detail adjustments found across the region."
Citi Futures Perspective's Tim Evans said Tuesday's modest strength was derived from "fundamental support from expectations for Thursday's DOE storage report that seem to be coming in lower than our own 62 Bcf estimate, and thus even more supportive relative to the five-year average for the date."
Evans contends that with an estimated 62 Bcf build, by Oct. 4, the year-on-five-year surplus will reach a stout 84 Bcf, "with the rising surplus putting downward fundamental pressure on prices. As a caveat, we'd note that if Thursday's storage build does prove lower than our forecast, it would imply a tighter balance that would flow through in the weeks to come, and we haven't made any adjustment yet for production losses across Colorado, so our forecast could be revised lower after Thursday's report."
INTL FC Stone Vice President Tom Saal, in his work with Market Profile, expects the market to test Tuesday's value area at $3.752-3.730 but cautioned that Tuesday's "fat" profile could be a market top.
In Saal's view the great benefit from the Market Profile is that it is designed to "reveal trader behavior through price action (both hedgers and speculators). What I have learned in my 20 years of commodity market experience [is that] it is more important to 'see what traders do,' rather than 'believe what they say,'" he said in a note to clients.