Despite negative guidance coming from the screen's 12.8-cent decline in December natural gas futures Friday, a vast majority of cash points traded Monday for Tuesday delivery moved higher -- from a few cents to just more than a dime.
The cash firmness was a little surprising, especially when considering the current fundamentals and the near-term temperature forecasts. Cash averages across the country, from the Northeast to the West coast, all moved in lockstep Monday, with almost no margin between locations or regions. Heading into Tuesday's trade for Wednesday delivery, the market will have support from near-month futures as the December contract added 4.6 cents to close at $3.845.
Gulf Coast prices could see an uptick in the next few days as the deepwater Gulf of Mexico Independence Hub was shut down over the weekend for scheduled maintenance. Enterprise Products Partners spokesman Rick Rainey said the hub had been flowing about 500 MMcf/d, which has been the normal throughput recently. He added that it is expected to start back up in the next couple of days and ramp up to approximately 500 MMcf/d again. He declined to elaborate on the work being done.
"Most cash points were up Monday and I'm not too sure exactly why that is," said a West Coast cash trader. "Cash obviously ignored futures, and in my opinion is ignoring overall fundamentals. My own opinion is the market's behavior could be explained by the devaluing of the U.S. dollar. People are throwing money into tangible things, which obviously includes commodities. This is actually keeping the price of the Nymex propped up higher than it might have been otherwise."
However, the trader noted that the firmness doesn't really gel with the fact that last week's 19 Bcf storage injection report for the week ending Nov. 5 pushed inventory levels to a new all-time high of 3,840 Bcf, The injection moved current inventories past the old all-time record level of 3,837 Bcf, which was notched for the week ending Nov. 27, 2009.
"Having 3.8 Tcf under our belt is a huge thing, and we're probably not done yet," the trader told NGI. "We're about as fat as you can get, so you would expect prices to plummet, but that's not the case. We've seen some really active trading out here."
Talking temperatures, he said the West Coast states have not gotten really cold yet. "It's balmy out West. We started to see some cooler temps last week, but we're back in the 70s to 80s, so it's pretty warm here. The heat is expected to stick around for a few more days, then it will cool off a bit.
While parts of New England, the Upper Plains, Rockies and Canada, were experiencing some winter chill, some near-term forecasts showed another warm-up on the way before another cold burst..
MDA EarthSat Weather said Monday morning that La Nina appears responsible. The six- to 10-day "has turned much warmer across the South, Midwest, and East in comparison to both late last week and the Sunday update," the private forecasting firm said. "Despite the strong signals for cold last week per the models, it appears La Nina impacts are more dominant.
"A strong gradient will develop over the Midwest between the warmer air to the Southeast and extreme cold to the Northwest. The strongest cold is likely to affect areas from the Northwest to Northern Plains, where a couple days of strong belows are likely. A developing upper latitude blocking pattern should allow the cold to approach the East late."
During the 11- to 15-day period, MDA EarthSat Weather said that while cooler air will persist along the East Coast, La Nina conditions "should battle back," limiting both the intensity and duration of the cold. During this time frame the south-central U.S. should stay on the warmer side of normal as the coldest air "should continue to trek to east," while slow warming trends should move over the Midcontinent late.
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