Natural gas prices for Wednesday physical delivery overall averaged a penny lower Tuesday despite some significant individual point gains in the Marcellus Shale. Elsewhere, most gains and losses were more or less equally dispersed, with most points trading a nickel on either side of unchanged.
Modest gains at Rocky Mountain locations were offset by flat to lower quotes in the Great Lakes. At the close of futures trading, September had eased 2.5 cents to $3.285 and October had fallen 2.3 cents to $3.312. September crude oil added 72 cents to $106.83/bbl.
A Great Lakes marketer said his company was content to let what it thought would be lower prices play out. "We haven't been buying gas since the price trend is down," said a Michigan marketer. "Right now the weather looks OK, and we just wanted to see how the weather shook out for the month. Today [Tuesday] we'll be lucky to hit 70 degrees."
Forecasters are calling for cooler temperatures to persist. "[A]nother cold front will drop across the Midwest on Tuesday with an unseasonably cooler airmass," said Wunderground.com meteorologist Jessica Parker. "Well below normal temperatures for this time of year are anticipated with the passing of this cold front. Daytime highs may run 10-15 degrees below normal through the midweek, while overnight lows are expected to drop into the 30s. This disturbance will catch up with the aforementioned system by Tuesday night as it reaches through the Eastern Seaboard into the Southern Plains."
Chicago's daytime high of 72 Tuesday was expected to hold Wednesday before rising to 75 on Thursday, according to Wunderground.com figures. The normal high in Chicago is 83. Detroit's 73 high Tuesday was anticipated to slip to 70 Wednesday before rising to 75 on Thursday. The seasonal high in Detroit is 82 this time of year. Milwaukee's 70 high Tuesday was predicted to rise to 72 Wednesday before advancing to its normal high for mid-August of 79 Thursday.
Gas on Alliance for Wednesday delivery shed 4 cents to $3.40, and deliveries to the Chicago Citygates fell 2 cents to $3.42. Consumers gas changed hands at $3.56, unchanged. Michcon packages came in at $3.48, a nickel lower, and at Dawn, Wednesday gas was seen at $3.78, 4 cents lower.
Out West, next-day packages managed to make it into the plus column if in some cases by only a penny or two. At the Cheyenne Hub, Wednesday parcels were seen at $3.20, a penny higher, and on CIG Mainline gas came in at $3.18, up 5 cents. On Northwest Pipeline Wyoming, Wednesday deliveries were seen at $3.14, up 2 cents, and at Opal gas came in at $3.22, 4 cents higher. Gas on El Paso non-Bondad rose 2 cents to $3.23.
The hot and cold game occuring in the Northeast around capacity-constrained Marcellus Shale points appeared to be running hot again Tuesday for Wednesday delivery. Gas in the region was once again in demand as Tennesse Zone 4 Marcellus and Transco-Leidy Line averaged $2.64 and $2.66, up 53 cents and 62 cents, respectively.
Market technicians see natural gas futures prices on track for a seasonal low under $3. "Last week gave a Thursday rally, but the week ended on a weak note, and there is nothing bullish about last week's candlestick [chart pattern]," said Walter Zimmermann, vice president at United ICAP. "[We are] still targeting the $2.920 to $2.870 range in time for the seasonal cycle low timing window of late August to early September," he said in a note to clients.
Jim Ritterbusch of Ritterbusch and Associates sees Monday's 8-cent gain as having adequately factored in a change in the near-term weather. In his view, what some are calling a short-covering rally, "appeared to efficiently discount a shift in short-term temperature views away from last week's unusually cool forecasts. Some above-normal patterns are now being expected next week across the northern tier states as well as a large chunk of the heavily populated northeast region.
"However, a significant counter is being seen in some continued cool trends within the lower region of the Midcontinent. But while we will recognize the contrast between this week's one-two week views and last week's forecasts, we will also note that the impact of the temperature factor is being downsized at this advanced stage of the cooling cycle. At the same time, there has been little need to insert storm premium given a lack of cyclone formation in the Atlantic."
In its 2 p.m. EDT Tuesday report, the National Hurricane Center continued to monitor a tropical disturbance in the eastern Caribbean. It expects the system to move toward the Yucatan Peninsula and southern Gulf of Mexico and raised its chance of developing into a tropical cyclone in the succeeding 48 hours to 20% from earlier estimates of 10%.
Weather forecasts warmed a bit from Monday. WSI Corp. in its six- to 10-day outlook showed encroaching warmth from Canada. "Today's forecast is not quite as cool in the lower Midwest and South compared to [Monday]. Forecast confidence is near to slightly above average with good large scale model agreement through the end of next week.
"The risk is even warmer than forecast across the north-central U.S., especially per the GFS, which implies anomalies of 10-20 degrees in cities like [Bismarck, ND] and [Minneapolis-St. Paul]. The official forecast was a bit more conservative as most ensemble members drop a weak front through here with showers and storms on days nine to 10."
Addison Armstrong of Tradition Financial sees "the market consolidat[ing] near levels reached after Monday's short-covering rally. "Gas prices, after sliding to a near a six-month low late last week, have rebounded 5% in the past couple days as the market appears to have priced in (perhaps temporarily) the mild weather and limited demands that are expected to prevail across much of the country during August."
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile was expecting the market to test Monday's value area at $3.351-3.343 before moving on and testing a second value area at $3.398-3.362.