Physical natural gas prices for weekend and Monday delivery overall fell on average 4 cents as traders expressed a reluctance to commit to a three-day purchase when other alternatives were available. Northeast and California points were especially hard hit. Futures prices took a dive as traders factored in little potential market disruption from Tropical Storm Isaac. September tumbled 10.0 cents to $2.702 and October shed 10.5 cents to $2.734. October crude oil skidded 12 cents to $96.15/bbl.
"No one wants to buy for the weekend when they can make spot purchases during the weekend if they have to," said an eastern marketer. "The pipelines are fairly well packed, and some pipelines will loan gas over the weekend if necessary as long as you make it up on Monday. Trading-wise it's just the Friday doldrums."
He added that he didn't think there would be much price impact if Tropical Storm Isaac entered the Gulf and even caused shut-ins. "There's just so much gas in onshore pools that any deficit from the Gulf can be made up by other locations."
Near-term weather forecasts called for dry, seasonal weather in New England for the weekend and into this week. "[H]igh pressure across New England today [Friday] will slowly drift to the Maritimes through this weekend. An isolated shower or thunderstorm is possible across the high terrain this afternoon and again Sat afternoon...but most of the area should remain dry. A cold front will cross New England Tuesday with another chance of showers and thunderstorms," the National Weather Service' southeast Massachusetts center said.
Forecaster AccuWeather.com reported that the high in Boston Friday of 78 would rise to 80 on Saturday and Sunday before reaching 83 on Monday. The normal high in Boston at this time of year is 79. New Haven, CT's Friday high of 84 was expected to ease to 82 on Saturday before rising to 83 on Monday. The seasonal high for New Haven at this time of year is 80.
Quotes on Algonquin Citygate were 12 cents lower at $2.90, and deliveries to Iroquois Waddington fell 2 cents to $3.10. Parcels into Transco Zone 6 200 L were 6 cents lower at $2.94.
At more southerly eastern locations prices for weekend through Monday gas skidded as well. Tetco M-3 was seen 7 cents lower to average $2.84, and gas on Dominion fetched $2.73, or 3 cents lower than Thursday. Deliveries to Transco Zone 6 New York shed 8 cents to an average $2.85.
A handful of Gulf points were able to avoid the steep declines of the East and Northeast. Gas delivered to the Henry Hub for the weekend and Monday was off a penny at an average $2.80, and deliveries to Tennessee 800 L eased a penny to $2.73. Quotes for gas on Columbia Onshore fell a penny to $2.73.
California locations took it on the chin. Quotes on PG&E Citygate plunged 7 cents to average $2.94, and deliveries to SoCal Border dropped 7 cents to $2.84. SoCal Citygate fell 6 cents to $2.94, and gas on El Paso S Mainline tumbled 14 cents to $2.86.
The California Independent System Operator predicted that Friday's peak load of 37,980 MW would slide to 33,114 MW Saturday.
Futures traders were hard pressed to find any good news in the 10-cent September loss, but a New York floor trader saw "a good sign that we settled above $2.70. This is the last Friday before the Labor Day weekend, and trading should be slow as guys start taking off for the holiday. If we had settled below the 200-day moving average at $2.685, things could turn ugly quickly."
Traders have been keeping a close eye on the movements of Tropical Storm Isaac, but a potentially equally important market driver is a change in the near-term weather outlook. MDA Information Systems in its Friday morning six- to 10-day forecast showed a ridge of above-normal temperatures centered over the Upper Midwest and extending as far as New England, New Mexico and North Dakota.
"The forecast has warmed significantly from the Midwest to East through much of the period. A stronger surge of heat will set up from the Northern Plains to Upper Midwest during the first half with upper ridging overhead and southerly flow at the surface. Subsidence to the north of Isaac will bring about additional warming into parts of the Tennessee Valley and Mid-Atlantic as well," the forecaster said. "Cool troughing should be stuck mostly over southeastern Canada rather than digging southward through the East Coast. The West has shifted some [what] cooler to account for a trough arriving along the coast."
In its 5 p.m. EDT report the National Hurricane Center (NHC) said Isaac had strengthened to 65 mph and was expected to make landfall on a beleaguered Haiti [Friday] evening (see related story). It was moving to the west at 16 mph. NHC showed the storm progressing up the west coast of Florida toward Alabama.
NHC also continued to follow a weakening Joyce. Now a remnant low, Joyce was 1,030 miles east of the Leeward Islands and was holding winds of 35 mph. It was moving to the west-northwest at 16 mph.
Jim Ritterbusch of Ritterbusch and Associates sees significant downside price risk. "First, the storm is expected to bring some cooling effects into some of the southern states. Second, we viewed yesterday's price rebound off of two-month lows as excessive. Third, this potential hurricane is not expected to exceed Category 1 status and, as a result, significant damage to offshore drilling facilities is not expected."
He added that he was conceding to "above-normal temperature trends that will extend through the first week of September, we still see downside risk as exceeding that to the upside by a significant margin. While price consolidation could continue into early next week, we expect another down spike into fresh two-month low territory that should set the stage for an eventual price decline toward the $2.50 area," he said in closing comments to clients.
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