Natural gas cash point averages across the country ballooned on Monday as a storm that brought multiple feet of snow as well as temperatures in the teens to the Midwest moved toward eastern markets. Most points across the country for Tuesday delivery climbed between a dime and 20 cents, while some spots in the Northeast shot higher by $7 to $11.
According to IntercontinentalExchange, Algonquin Citygates increased by $7.19 to average $14.07, while Transco Zone 6-NY jumped $11.31 to average $20.15. The storm, which dumped snow across the Midwest and was accompanied by blustery winds and frigid temperatures last weekend, is headed East, according to forecasters.
While most pipelines serving the Northeast had no critical announcements posted to their respective electronic bulletin boards, "sometimes it only takes one to send the market scurrying," an analyst told NGI. In this case, he was referring to Tennessee, which issued Operational Flow Orders in its New England Zones 5 and 6 for Tuesday flow.
Algonquin Gas Transmission also posted that it has restricted a portion of interruptible nominations for Tuesday that were sourced upstream of its Stony Point Compressor Station (located just outside of New York City) for delivery downstream into New England. The pipeline stipulated that no increase in nominations sourced upstream of Stony Point for delivery downstream of Stony Point, except for Primary Firm No-Notice nominations, would be accepted.
Interestingly, while regions currently within the big chill posted sizeable gains Monday, so too did spots that are enjoying downright balmy conditions, as gas was being pulled out of market to serve the Midwest.
"Western points saw some sizeable increases as well on Monday as gas was being diverted to meet Midwest demand," said a western marketer. "Right now, the middle of the country is pulling gas from us, so we're seeing extra demand, which is propping up prices. While it is warm on the West Coast right now, we're looking at some cooler temperatures moving in over the next few days. It is not overwhelming, and we are expected to see normal to above normal temps through most of December, so if it stays cold in the Midwest, this situation where our gas flows East, should continue for a while."
The marketer noted that he wasn't sure whether the prices could stay strong over the long term, especially with plenty of gas in storage. "I think some storage operators are hesitant to pull a lot of gas out too early for fear of not having enough later in the winter if it proves to be a cold one," he told NGI. "We're only a month and a half into the season with January and February still ahead of us, so I think some people are filling their gas demand needs in the market instead of going to storage. As we move deeper into winter, we'll see less and less of this occurring."
However, prices could continue to be bolstered with gas demand remaining elevated as the deep freeze is not expected to loosen its grip for much of the eastern half of the United States anytime soon.
According to private forecaster Frontier Weather, the six- to 10-day forecast for Dec. 18-22 is calling for above normal temperatures in the Southwest and Rockies, below normal from the northern Plains through most of the East, with normal seasonal readings in New England as the exception.
However, Citi Futures Perspective analyst Tim Evans said the 11- to 15-day outlook got a bit warmer in Monday's run of the model. Noting that temperatures late in December are currently expected to be "less impressive," he said weather will still be calling the shots in the natural gas markets for the next couple of months.
"The larger picture for natural gas remains highly weather dependent, with prices having a chance to work higher as long as temperatures remain well below normal, but becoming vulnerable on the downside on normal or above normal readings," Evans said.
The natural gas futures market took note of the moderating near-term forecast as the January contract gained big earlier on Monday before returning to close virtually unchanged (see related story).
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