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Marcellus, Midcontinent No Match For Broad Cash Weakness; Futures Flounder

Physical natural gas prices for Tuesday delivery overall fell a penny on average Monday as most points fluctuated within a few cents of unchanged. Modest strength in the Midcontinent and double-digit gains at certain Marcellus points were unable to offset broad weakness elsewhere. At the close of trading October futures had retreated 8.5 cents to $3.602 and November was off 8.6 cents to $3.677. November crude oil dropped $1.16 to $103.59/bbl.

Northern Natural Gas declared a Force Majeure on its Marquette 12 in. branch line which was expected to last until Oct. 1. Traders, however, noted no market impact.

Northern said it is required to perform unplanned maintenance on the Marquette 12-inch branch line [and] has discovered immediate pipeline conditions that need to be addressed and remediated. The pipeline pressure will be reduced until the pipeline repairs are complete. Customers will experience lower than normal inlet pressures.

"The only points on Northern that would affect us would be Ventura or Demarcation," said a Nebraska utility buyer. "We are just rocking along at our normal 33,000 Dt/d plus another 5,000 once our LNG plant kicks in," he said.

Quotes for Tuesday gas on Alliance fell 3 cents to $3.71 and deliveries to Chicago Citygates dropped 2 cents to $3.72. Deliveries on Demarcation were down 4 cents to $3.62 and packages at Northern Natural Ventura slid 4 cents as well to $3.61. Gas at the NGPL Midcontinent Pool was up 4 cents to $3.55.

For those monitoring the aftershocks of the massive flooding in Colorado last week (see related story), there has been relatively little to talk about from a supply/demand standpoint.

Wei Chen, a natural gas analyst with Genscape Inc., said Monday that there have been "no impacts to speak of" due to the flooding in Colorado. However, she did mention that Genscape has been monitoring a recent unrelated flow reversal in the region.

"We are continuing to see gas flowing from the Pacific Northwest into the Rockies," she told NGI. "Traditionally, gas would flow from the Rockies into the Pacific Northwest, but now during shoulder seasons, that is reversed because we are getting more gas from Western Canada. It is flowing down into the Northwest and pushing gas back into the Rockies," which is having a depressing price effect on Rockies gas.

Most next-day Rockies points came off by a couple of pennies to just shy of a dime on Monday for Tuesday delivery.

New England points fell modestly as weather forecasts called for rising temperatures but slightly below normal. AccuWeather.com forecast that the high in Boston Monday of 63 was expected to rise to 67 Tuesday and Wednesday. The seasonal high in Boston is 70. Hartford, CT's Monday high of 64 was anticipated to rise to 68 Tuesday and 71 on Wednesday. The normal high in Hartford is 72. Providence, RI was predicted to see its Monday high of 64 rise to 68 on Tuesday and 69 on Wednesday. The normal mid-September high in Providence is 72.

AccuWeather.com meteorologist Courtney Spamer forecast "Dry and cool weather moving in for the first few days of autumn. A cool front moved through early Sunday bringing up to half an inch of rain in about three hours. But in the wake of the front dry weather moved in."

Her data shows that "Temperatures will settle in the high-60s to low-70s on Monday and will continue through the middle of the week with sunshine overhead each day. Evening temperatures will be in the mid-50s with partly cloudy skies for most of the week. Dry weather is expected to remain in place as high pressure holds over the Northeast through the week, [and] the next chance for wet weather will not reach New England until late in the weekend."

Gas for delivery Tuesday at the Algonquin Citygates rose about a penny to $3.71 and Iroquois Waddington was down 2 cents to $3.99. Gas on Tennessee Zone 6 200 L shed 3 cents to $3.69.

Next-day power prices throughout the East fell in Monday's trading. IntercontinentalExchange reported that next-day peak power into the New England Power Pool's Massachusetts Hub $7.73 to $37.24/MWh and next-day deliveries of peak power to the PJM West Interconnect fell $2.66 to $33.27/MWh.

Locations in the Marcellus region bucked the market's soft tone. On Tennessee Zone 4 Marcellus Tuesday gas soared 34 cents to $1.94 and on Transco-Leidy Line Tuesday deliveries jumped 62 cents to $2.33.

Elsewhere in the East next-day gas was mixed. Parcels deliverable to Dominion gained about 6 cents to $3.46 and gas on Tetco M-3 fell a penny to $3.65. Gas bound for New York City on Transco Zone 6 lost 3 cents to $3.77.

Gas in Los Angeles and California points fell upwards of a nickel as mild weather was expected. According to AccuWeather.com meteorologist Kristen Rodman, "The city will kick-off its first few days of fall with sunshine and mild temperatures. For the second half of the weekend and the first day of fall on Sunday, temperatures were a little warmer than Saturday reaching the mid-70s. The first official day of fall began on Sunday with a high temperature of 76 degrees. Temperatures will spike back up into the 80s Monday and Tuesday. These days will consist of mostly sunny skies during the day and clear skies during the evening."

Gas at the PG&E Citygates for Tuesday delivery fell 3 cents to $4.01 and gas at the SoCal Citygates slipped 3 cents as well to $3.81. At the SoCal Border Tuesday parcels were seen at $3.68, down 5 cents and on El Paso S Mainline next-day gas came in at $3.74, down 6 cents.

Futures prices got hammered by a trifecta of warm temperatures, an Atlantic Basin with no tropical activity and expectations by one analyst of a build in this week's inventory report of 15 to 20 Bcf greater than last week's 46 Bcf.

Longer term analysts see the natural gas market confined to a broad range. Mike DeVooght, president of DEVO Capital, said that last week when technical resistance held at $3.75 "optimism quickly faded on the belief that a few warm days was not enough to support the market as we enter the shoulder month. Fundamentally, it is difficult to make a bullish case for natural gas. It seems that the greater likelihood is that we continue to trade in the low $3 to the low $4 range for the foreseeable future."

Traders should hold a short October position initiated when June was at $4.35 and subsequently rolled over. "Risk 25 cents on the trade," DeVooght said. End-users should stand aside, and producers and those with exposure to lower prices should hold short an October position from $3.75 to $3.95 and continue to hold a short November-March strip established from $4.50 to $4.60.

Commodity Weather Group in its morning six- to 10-day outlook sees above-normal temperatures confined to an area north of a broad arc extending from Montana to Illinois to New York. "Outside of some stronger cooling for the interior West in the short range, the general view for the six-15 day is one of very few extremes overall as the main impressive warm anomalies reside in Canada instead," said Matt Rogers, president of the firm.

"For the six-10 day, the latest guidance generally prefers the warmer U.S. anomalies to be in the Midwest (and there is continued MJO [(Madden Julian Oscillation) support for this], while the East and South hold closer to seasonal. Western cooling comes in waves of troughing but should be weaker in the six-10 versus the one to five.

"We see similar themes again in the 11-15 with the Midwest and possibly the upper Northeast seeing the best chances to stay a bit warmer, but changes in the North Pacific and along the West Coast offer cooler risks, especially later to the East/South (as noted by Canadian and American models by late period)."

Addison Armstrong of Tradition Energy sees the outlook for milder weather limiting demand from power generators.

Tom Saal in his work with Market Profile said the "back years [are] showing mixed signals on market direction" but expects the market to test last week's value area at $3.752 to $3.686 before moving on and "eventually" testing $3.622 to $3.534. 

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