The natural gas cash market added 2 cents on average overall Tuesday for Wednesday delivery with small gains and small losses at most points characterizing the day's trading. Midwest points were mixed as weather outlooks held to seasonal norms, and Gulf points were a few pennies higher. At the close of lackluster futures trading September had drifted lower by 0.1 cent to $3.318 and October had eased 0.3 cent to $3.343. September crude oil dropped $1.26 to $105.30/bbl.
Load-killing cool, wet weather was expected to dominate major Midwest and eastern markets. "Elsewhere in the eastern half of the nation, cool, autumn-like temperatures continue for the Midwest into the Northeast and Mid-Atlantic," said Wunderground.com meteorologist Jessica Parker. "In addition to cool weather, showers and thunderstorms are expected from parts of Michigan southeastward into the northern states of the Mid-Atlantic region."
Chicago's Tuesday high of 88 was forecast to hold through Wednesday before easing to 75 on Thursday, according to Wunderground.com. The normal high in Chicago in early August is 83. Detroit's Tuesday high of 79 was anticipated to rise to 82 Wednesday before easing to 79 on Thursday. The seasonal high in the Motor City is 80. Milwaukee's 84 high on Tuesday was anticipated to hold Wednesday before sliding to 73 on Thursday. The normal high in Milwaukee is 79.
Gas for Wednesday delivery on Alliance rose 6 cents to $3.47, and packages at the Chicago Citygates were seen 4 cents higher at $3.44. Gas on Consumers came in 4 cents lower at $3.54, and deliveries on Michcon changed hands at $3.51, down 3 cents. Dawn gas for Wednesday delivery was unchanged at $3.80.
Quotes at Gulf Coast locations were nominally higher. ANR SE was quoted at $3.27, up about 2 cents, and on Columbia Gulf Mainline Wednesday deliveries were seen at $3.31, higher by a penny as well. On Transco Zone 3 gas for next-day delivery rose by 3 cents to $3.34. On Tennessee 500 L gas was flat at $3.31 and at the Henry Hub gas changed hands 2 cents higher at $3.35.
Futures traders aren't willing to call a market bottom. "Speaking to the fundamentalists, we have had our windows open here in Washington, DC, for three of the first five days of August. That is unheard of," said Powerhouse LLC Vice President Elaine Levin. "I have to think that will be reflected in the storage numbers.
"I follow this group called the Capitol Weather Gang, and they are a bunch of weather geeks that write a blog for the Washington Post, and they keep a tally of the number of days over 90 degrees. I realize Washington, DC, is not the country, but this year we have had 21, the most we have had is 67 in 1980 and 2010 and the fewest was seven in 1905. Last year there was 52 degrees over 90, so I have to tell you we are running below our normal. The later you get into summer the harder it is to get those degree days.
"The market just does not look 'bottomy,' and though bottom-picking can be fun, I just don't see it yet. Our Elliott Wave is in a fifth wave down with a target of $3. We also have other confirmation of $3.
"We've been pretty busy on this break below $3.60. We have seen end-users saying, 'I can live with these prices' and have been doing things to lock in the winter and even out the curve. One of the nice things about options if you are concerned about availability and demand, you still have your upside covered, and if the market were to return to $2.50 or $2, then you will still participate in the downside."
With the market posting a new five-month low Monday at $3.309, other market technicians are trying to ascertain where technical support might lie, a point from which prices may at least stabilize if not advance. Tom Saal, vice president at INTL FC Stone in Miami, points to gaps on the September bar chart at $3.548-3.520 and more recently $3.320-3.291.
"I thought with the Market Profile we would hold that $3.60 area, but the seasonal fundamentals just took over," Saal told NGI. "If they are in charge, we are going to keep grinding lower. It continues lower past Labor Day, and we have another month of this downtrend. We might do some zigging and zagging, but the market has reacted positively to the late cold weather and the recent hot weather, but when the weather backs off, she starts grinding lower.
"Since it took out the number I thought would hold, that tells me that we are continuing down. I'm looking for a bottoming pattern of some sort and don't have one." Saal acknowledged that with power, seasonal and fundamental factors in play, that the gap at $3.320-3.291 providing significant technical market support was slim.
Others see the market working down another 10 cents. "Although this market is beginning to see some signs of support as much bearish weather news has been priced in and as large speculative traders will now begin to demand price rallies before adding to short holdings, we still see high probability of fresh lows with nearby futures ultimately working their way down to about the $3.22 level," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients.
"Updates to the one- to two-week temperature forecasts don't appear quite as bearish as seen through the weekend as cool deviations from normal are becoming less pronounced and coverage across the country is being reduced with the bulk of the below-normal temps largely concentrated within the northeast quadrant.
"However, we will note that the cool region that now extends well into the third full week of August includes heavily populated areas such as Chicago and New York. As a result, the market is being forced to price in some bearish storage numbers that are beginning to stretch through month's end as far as the EIA releases are concerned."