Both futures and cash markets fell as low demand and indications of a weakening economy prompted hefty declines.
The cash market suffered a thumping Friday as traders cited the continuing lack of meaningful demand and a normal Friday tendency for light weekend buying.
Only one point avoided fairly hefty losses. Some eastern and Northeastern points showed losses approaching a quarter or more. At the close of futures trading July had fallen 9.6 cents to $2.326 and August had retreated 9.4 cents to $2.387. July crude oil tumbled $3.30 to $83.28/bbl. Financial markets were also weak with the Dow Jones Industrial Average giving up close to 300 points.
"There's just no demand. It's neither cold enough nor hot enough," said an eastern marketer. "There is also no power demand."
He added that with the lack of demand, "there should be a lot of gas going into storage. There is just so much gas in so many pipes that the differences between Socal, Florida and other points become minimal."
IntercontinentalExchange reported lower prices for Monday power at eastern points. At the New England Power Pool, Monday LMP (locational marginal price) fell 39 cents to $26.00/MWh, and at the PJM West Interchange Monday power dropped a healthy $3.02 to $33.31/MWh.
Quotes on Tetco M-3 and Transco Z-6 for weekend and Monday delivery each plunged more than 15 cents.
Some northeastern points suffered greater losses with Tennessee Zone 6 200 L and Algonquin Citygate both falling just more than 20 cents. Parcels into Iroquois Waddington were seen a dime lower.
A Rocky Mountain producer was philosophical about the day's decline. "It's something of a dark day in a lot of commodity markets. Crude oil and copper are down, and Fridays are often weak when you have economic reports such as the employment situation."
He also noted that although a lot of attention is paid to the Energy Information Administration (EIA) 914 report, "industrial demand is pretty weak. The only thing that is saving us is gas used for power. There was a 41% increase in gas used for power this March versus last March; that's up 200 Bcf for the month and higher than some previous Junes. That's what is keeping us alive."
The Rocky Mountain producer took the opposite position on the upcoming storage report from the eastern marketer and suggested that it would be a very good (lean) storage report because of the coal-to-gas switching, and "we had some hot weather Memorial Day weekend. The numbers are just coming in, but it looks like the storage number will be even less than last weekend, and that would be unheard of," he said.
Tim Evans of Citi Futures Perspective predicts a build of 45 Bcf for the week ended June 1, well below the 81 Bcf injected last year and the 100 Bcf five-year average.
Gulf Coast points came out relatively unscathed with Henry, Columbia Gulf Mainline and Tetco E LA all quoted about a dime lower, while ANR SE was down more than a nickel on the day.
Futures traders see the market confined to a broad range. "I think we are in a longer-term sideways congestion pattern. I'm looking for a range of $2.10 to $2.80," said Tom Saal, vice president of INTL Hencorp Futures in Miami. He noted that with a potentially softer economy on tap as indicated by Friday's weak employment report "industrial demand could be throttled back, but we've got the cheapest energy on the planet."
Others also see the market having to deal with wider economic issues. Natural gas has long enjoyed some immunity from the vagaries of broader economic and financial turbulence; "however, the magnitude of the price plunge in other industrial commodities such as the petroleum and copper markets is almost certain to force some spillover into the natural gas space," said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients.
"Despite the attention to the big pop in natural gas demand this year from the power sector due to coal-to-gas substitution, it should be kept in mind that the industrial component of the demand pie still represents roughly 30% of overall consumption. Consequently, the possibility of the slowing in U.S. economic growth due to weakening in other parts of the globe should theoretically have some impact on natural gas pricing. Another aspect is simply the fact that existing speculative longs in natural gas may be liquidating positions in order to meet margin calls in other areas such as the oil complex. These possibilities represent the major hazard to our expectation of support at about the $2.35 level basis nearest futures."
Exacerbating the trend of lower equity and commodity prices was the 8:30 a.m. EDT release of May employment data by the Labor Department. It was a big disappointment to followers of the economy. Expectations were for an additional 170,000 non-farm payroll positions to be added, according to economists at MarketWatch, but the actual figure was a dismal 69,000. The unemployment rate held steady at 8.2%. Equity markets were lower in overnight trading, but after the release of the data, futures on the Dow Jones Industrial Average were a sharp 185 points lower. The Dow finished the day down 275 points at 12,119.
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