The physical market overall on average rose 6 cents Wednesday led by volatile trading at Northeast points. Eastern locations as well as Marcellus market points gained, but Midwest locations inched higher. At the close of futures trading October had fallen 5.9 cents to $2.795 and November was off 6.3 cents to $2.937. October crude oil rose 6 cents to $95.36/bbl.
Northeast markets continued their volatile trading as traders reported restrictions on gas entering pipelines such as Algonquin and Tennessee from the Maritimes and Northeast pipeline system.
"There is an outage from Sable Island and they will not be sending any gas down for a few days," said a Northeast marketer. He added that he expected the outage to impact the market for the next several days, "but the demand should be going down with lower humidity and the upcoming weekend, but until then we should see stronger prices."
AccuWeather.com forecast that Boston's high of 82 Wednesday would ease to 81 Thursday before rising to 84 on Friday. The normal high for this time of year in Boston is 76. Relative humidity Wednesday resulting from remnant moisture from Isaac was seen as high as 87% and Thursday was forecast to reach a muggy 90%. By Friday relative humidity was anticipated to drop to 79%.
Quotes on Algonquin surged 31 cents to an average of $3.55 and deliveries to Tennessee Zone 6 200 L gained 30 cents to $3.52. Parcels into Iroquois Waddington added 19 cents to $3.60.
Points farther south also rose. At Tetco M-3 gas for Thursday delivery picked up 8 cents to average $3.11 and at Transco Zone 6 New York quotes were 10 cents higher at $3.13. On Dominion next-day gas added 12 cents to $2.89.
The natural gas market in Appalachia got a bit more open and efficient Tuesday when Dominion Transmission Inc. put into service a 484,000 Dt/d interconnect with Texas Eastern east of Pittsburgh. The project is designed to lessen the bottleneck, which existed prior to the boom in Marcellus Shale development, which prevented some of the gas producers in West Virginia and southwestern Pennsylvania from getting gas to markets in the Northeast and Mid-Atlantic regions, a DTI spokesman said (see Shale Daily, Sept. 4).
Marcellus bottlenecks may be a thing of the past. Points throughout western Pennsylvania are in much closer alignment than during earlier times. The much maligned Tennessee Zone 4 Marcellus, which has traded at 80 cents and below, was quoted for Thursday delivery at an average $2.84, up 4 cents. Marcellus points farther west were less than a dime higher. Tennessee Zone 4 Station 313 was higher at $2.92, up 4 cents.
Midwest locations less affected by the Isaac-driven humidity rose less. At the Chicago Citygate gas was quoted at an average $2.95 and on Consumers prompt gas was seen at $2.99, unchanged. On Michcon Thursday deliveries were quoted at $3.00, higher by 2 cents.
Futures traders see the day's decline as pointing to lower prices. "I think we are headed to $2.50 in the October contract and it's just a matter of time before we get there," said a New York floor trader. "It could be a week or two weeks, but I think that is where October goes off the board."
The market "feels heavy" and with the (Energy Information Administration) inventory number coming out "we trade down to $2.68 tomorrow [Thursday]. I don't see anything too crazy with the number [Thursday]."
Citi Futures Perspective analyst Tim Evans is calculating a storage build of 38 Bcf, well below last year's 62 Bcf and a five-year average of 60 Bcf. Ritterbusch and Associates is looking for an increase of 43 Bcf and Bentek Energy, using its North American flow model, sees a 23 Bcf build.
For the last four prior sessions futures have posted gains, but analysts are expecting the market to gravitate lower over the coming weeks. "On a trading basis we are looking for the market to work lower over the next three to six weeks. We will hold current positions," said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm.
DeVooght counsels end-users and trading accounts to stand aside. Those with exposure to lower prices should hold what's left of the summer strip at $3.00-3.20 and the winter strip at $3.75-3.95. He suggests to continue selling winter months above $3.75-3.95 with light exposure. He also recommends holding on to the remainder of an October $2.50 put stack designed to cover the summer strip initiated earlier at 25-27 cents.
The brutal heat of weeks past is gone, but warm temperatures continue to hang around. MDA Information Systems in its Wednesday morning six- to 10-day forecast showed a ridge of above-normal temperatures plunging south from Canada into the Northern Plains as far south as Colorado and extending west to California. The Southeast is expected to be below normal.
"The East Coast has shifted a bit cooler through the first half of the period, where at least a couple days of marginal belows are likely," MDA stated. "Variability will be the theme in the Central U.S., where temps will bounce back and forth between above and below normal, though the risk for extremes to either side remains quite low. The most persistent warmth will be focused over the interior West, though even this region will see some variability given the troughiness near Alaska and its energy imparted on the pattern. Models vary in the details but agree on the big picture, keeping confidence moderate to high."
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