The cash market overall surged on average by 17 cents Tuesday as traders scrambled to make up volumes not purchased going into the long holiday weekend, screen prices initiated a solid advance to close at the high end of the day's range, and traders hinted at expectations of a bullish storage report Thursday. At the close of futures trading, October was 5.5 cents higher at $2.854 and November had added 3.7 cents to $3.000. October crude oil tumbled $1.17 to $95.30/bbl.
Northeast points led the charge higher. "I think some people take short positions on pipes and will pull from the pipe on the weekend and pay it back over the next few days. However, if you get out of whack too much, the pipelines can impose penalties," said an eastern marketer.
"Nymex went up about the same time we started trading in the morning. It started out in the mid $2.70s and ticked up from there, and that always has an effect on the market. Everything trades relative to the Henry Hub, and we did have some demand. There were a few folks out buying, but nothing extreme."
He added that temperatures were starting to moderate, but September was expected to be warm. "I think we'll see higher prices tomorrow, too. The demand really isn't there," he added. "It's supposed to be 80 Wednesday and 81 on Thursday and 84 Friday in Boston, but the balance of the month is mild."
MDA Information Systems in its one- to five-day forecast shows a curious configuration of normal temperatures centered over North Dakota, South Dakota and Nebraska with concentric bands of above-normal temperatures extending as far out as Alabama, New England, the Pacific Northwest and Desert Southwest.
Quotes on Algonquin rose 31 cents to average $3.24, and Wednesday gas on Tennessee Zone 6 200 L gained 17 cents to $3.22. Gas into Iroquois Waddington posted a stout 29-cent gain to $3.41.
Farther south, locations were almost as strong. Tetco M-3 parcels were up 24 cents at an average $3.03, and gas on Transco Zone 6 New York added 24 cents to $3.03 as well. Next-day gas on Dominion gained a robust 15 cents to $2.77.
Gulf points firmed as well. ANR SE was up by 14 cents to average $2.76, Columbia Gulf Mainline gained 14 cents to $2.78, and Henry Hub quotes were 9 cents higher at $2.81.
Tetco E LA rose exactly 12 cents to $2.84 and Tennessee 500 L gained 11 cents to $2.83. Transco Zone 3 surged 16 cents to $2.85.
Futures traders are looking higher. "We are looking for $3. It's already $3 in the November, January and further out contracts," said a New York floor trader. It was his view that the weather-storage dynamic would be the catalyst to take prices still higher. Traders are expecting lean injections as a result of Gulf of Mexico shut-ins of about 3 Bcf/d prompted by Hurricane Isaac.
Tim Evans of Citi Futures Perspective forecasts a build of 38 Bcf in this week's storage report, well below the 60 Bcf five-year average.
Analysts see technical considerations coming into play. "Although the market has fully digested the tropical storm factor and has likely priced in a reduction of as much as 15-20 Bcf relative to what would otherwise have been seen, the technical picture could potentially take on a more bullish appearance should the August down-trend line see a violation," said Jim Ritterbusch of Ritterbusch and Associates. His data shows the October futures contract has been stopped cold at the trend line at roughly the $2.81 level, "but we feel that potential upward pull from the petroleum complex could hoist the market briefly above this chart point," he said.
"Some spillover from the oil and into the natural gas is not purely sympathetic given the importance of the industrial sector within the natural gas market. Any efforts toward stimulus by the Federal Reserve would justifiably carry some bullish implications for the U.S. manufacturing sector that would bode well for some up-shift in natural gas demand. With the temperature factor winding down, the market will be looking for any bullish tidbits capable of providing a partial offset to supply side factors that remain undeniably bearish," he said in a weekly summary to clients.
Weather forecasts have moderated considerably from the brutal heat of past weeks. WSI Corp. of Andover, MA, in its six- to 10-day outlook shows above-normal temperatures limited to the Northern Plains and some below-normal temperatures creeping into the Southeast. "[Tuesday's] forecast is a shade cooler over most of the eastern U.S. than it was [Monday]. Temperatures may trend a shade cooler over most of the eastern U.S. than currently forecast as more fall-like readings are expected to overspread the region next week. The Northwest and Texas may trend warmer than currently forecast." Confidence in the forecast was considered to be average.
The Atlantic continues to be active, although no storms are a threat to the U.S. At 5 p.m. EDT, Tropical Storm Leslie was 500 miles south-southeast of Bermuda and was packing winds of 65 mph. It was moving slowly to the north at 3 mph and was headed for Bermuda.
Tropical Depression 13 has morphed into Tropical Storm Michael. It was 1,210 miles west southwest of the Azores and was headed to the central Atlantic on a northerly course at 6 mph. Maximum sustained winds were up to 50 mph.
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