With substantive heating load retreating largely to the sparsely populated Upper Plains of the U.S. and western half of Canada, and only a modest amount of power generation demand for air conditioning having built up in the southern U.S. to replace it, most points fell Monday.
The previous Friday's drop of 11.2 cents by May futures was a further depressant on the cash market, but the restoration of industrial load from its usual weekend decline along with a bit of cooling load across the South and to some degree in the Northeast had some impact in creating more price firmness Monday than on Friday.
Flat to about 15 cents higher quotes for several locations in the Northeast, Midcontinent and West were the exceptions to overall declines. Most points dropped between 2-3 cents and nearly a quarter.
Although May futures made an attempt at recovery from their early softness, they still finished the day 4.4 cents lower (see related story).
A couple of pipes ended warm weather-based restrictions over the weekend (see Transportation Notes) and problems with excess supply had ended for the most part in the West.
Northeast buyers may have been shopping for imbalance makeup gas Monday after New York City temperatures shot up into the low 90s Sunday. Although Big Apple highs were retreating into the low to mid 80s Monday and Tuesday, that was still unseasonably warm, and Boston-area readings were expected to spike into the upper 80s Tuesday.
Some parts of the South are reaching the 80s early this week, which is certainly inspiring some use of air conditioning, but that is being offset to a large extent by relatively mild conditions in the low to mid 70s in other sections of the region.
Meanwhile, the Rockies and Midwest are moving toward each other temperature-wise and due to share similar territory over the next day or so -- the Rockies warming into the upper 30s to lower 40s for lows and the Midwest cooling off into roughly the same area.
Analysts at SunTrust Robinson Humphrey/the Gerdes Group noted that as of Friday's screen close, crude oil cost 15.6 times the price of natural gas on a heating value basis, which they said was the second highest ratio over the past decade behind September 2008 when crude was still topping $120/bbl. "To place in that context, the average ratio over the past 10 years is 8.2," they said. While oil and natural gas largely satisfy different markets (oil for transportation, gas for space heating/power generation) and thus experience little direct competition, the relationship is worth keeping an eye on as it tends to demonstrate some element of mean reversion, the analysts said.
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