Feeding off of the new 12-month low recorded in front-month natural gas futures on Friday, the cash market responded on Monday by falling at a vast majority of points across the nation. While most cash averages declined by less than a dime, a couple of gains in the nickel to dime range were sprinkled across the country, especially in the East.
Soaring natural gas storage levels and an uneventful and fading Atlantic hurricane season has created a fairly bleak outlook on natural gas prices. After recording a 12-month low for a front-month natural gas futures contract on Friday at $3.520, the November contract probed even lower on Monday to record a 13-month record. During the regular session, the prompt-month contract recorded a low of $3.410 before closing at $3.431, down 10.4 cents from Friday's finish (see related story). The last time front-month futures traded lower was back on Sept. 16, 2009, when the October 2009 contract traded down to $3.355.
Cash market values might not be able to find much support from the screen going forward either. Rafferty Technical Research broker Steve Blair told NGI late last week that a breach and close below $3.500 would clear the way for a test of support down at $3.230. "There isn't really anything positive on the fundamental side to stand in the way of testing lower values here," Blair said. "We'll have to see how low this thing goes."
Most Midcontinent price point averages declined from a few pennies to a nickel as gas supplies remained abundant throughout the region, as they do across much of the country.
"Oil prices are going up, gas prices are going down. It doesn't make a whole lot of sense," said a Midcontinent marketer. "Oklahoma interstates are very weak. There really is no demand. The problem we're seeing is the capacity gets filled on Enogex and so we can't go anywhere. The gas behind that pipe is trading at a discount. It's the same thing being experienced out west. If you can't move it, the gas just gets stuck in the pipe. We need some weather to take some of the excess gas out of the system, but right now the heating demand just isn't there."
The marketer added that the futures market is not helping things either. "I think futures are going to continue lower. The way things are going I think we could see a $2 handle in November. Based on what I'm seeing everyday, it is just the same old story. Storage is getting fuller and fuller."
While many have already written off the 2010 Atlantic hurricane season as a bust (see Daily GPI, Oct. 18), some forecasters are leaving the door open for the development of a system over the next few weeks that could impact Florida or the Gulf of Mexico.
While noting that storms that develop in mid to late October often target the Florida Panhandle, AccuWeather.com meteorologist Heather Buchman said the firm is currently monitoring the potential for a new tropical system to develop over the western Caribbean this week.
If this system does develop, it would become the 17th tropical system of the season and be given the name Richard. If this system does form, AccuWeather.com hurricane experts expect it to follow one of two general tracks: either westward into Central America or north-northeast toward the general direction of Cuba.
The westward track into Central America would put areas from Nicaragua to the Yucatan Peninsula at risk for flooding rain and possible wind damage, Buchman said. while the other scenario would bring the system north-northeast toward Cuba or Jamaica near the end of the week, "and possibly even into the Bahamas or Florida thereafter."
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