Overall physical gas Wednesday was unchanged on average with Rockies points the major winners and volatile Northeast points showing the greatest losses. Midwestern and eastern locations were largely flat. At the close of futures trading the October contract had fallen 1.1 cent to $2.762 and November was 1.6 cent lower at $2.945. October crude oil plunged $3.31 to $91.98/bbl.
Cash prices at most Midwest points were within a penny or two of unchanged as buyers saw little in the way of weather demand in spite of nuclear outages.
"It's going to be about 80 [Wednesday], and our power generation customer hasn't called us looking for fuel to run their plants. I don't think we'll be hearing from them unless they have an equipment malfunction," said a Midwest gas buyer.
He added the outage of the 476 MW Fort Calhoun nuclear plant in the area seemingly had no impact on prices either. The nuclear generating plant is just one of the 24 nuclear plants shown as either off-line or producing at less than 100% of full power in the NGI NRC Power Reactor Status Report. The 24 nuclear plants' generation represents a loss of 15,653 MW out of total U.S. capacity of 100,900 MW from 104 facilities.
"You can't complain when gas is under $3. Customers aren't concerned, and I think they actually use gas a little more in market conditions like this. They are a little freer with the thermostat," the Midwest buyer said.
Next-day gas on Michcon was steady at $2.96, and buyers on Consumers saw quotes down 1 cent to $2.98. At the Chicago Citygates Thursday deliveries added 2 cents to $2.92 and on Alliance prices were down a penny at $2.93. Deliveries to Northern Natural Gas Ventura added 6 cents to $2.87.
Tom Skilling of the Chicago Weather Center said the forecast for Thursday called for "comfortable temperatures only a few degrees below 'normal' late September levels and just a degree cooler than Wednesday." The normal Sept. 20 high is 73-degrees, he noted.
Next-day quotes at Northeast points fell harder than any other points, but volatility was tempered compared to recent price swings. Algonquin Gas Transmission has advised shippers looking to move gas beyond its Burrville, RI, point to Boston to seek supplies from Tennessee, the Maritimes, or from liquefied natural gas imports at Everett, MA.
Thursday gas at the Algonquin Citygates fell 19 cents to $3.72 and deliveries to Iroquois Waddington slipped 8 cents to average $3.26. Next-day parcels on Tennessee Zone 6 200 L dropped 4 cents to $3.49.
Next-day power prices throughout the East and Northeast were weaker. IntercontinentalExchange reported power into the New England Power Pool for Thursday's day-ahead locational marginal prices fell $2.90 to $35.85/MWh and power into the PJM West Hub eased 81 cents to $33.28/MWh.
Gas at Dominion was up a cent at an average $2.78 and deliveries to Tetco M-3 lost a cent at $2.91. Transco Zone 6 New York came in at $2.91 as well, which also down a cent.
Rockies prices firmed. Deliveries on CIG Mainline were up 6 cents to average $2.73 and gas at the Cheyenne Hub added 3 cents to $2.73. Quotes on Northwest Pipeline Wyoming rose 6 cents to $2.72 and gas into Opal gained 6 cents to $2.76. On the West Coast deliveries to Malin added 6 cents to $2.82.
Futures traders didn't see much price movement. "It was kind of a sideways day. It think traders will try to take advantage of a lack of liquidity and you will see periodic price spikes," said a New York floor trader. "I think you will see a bunch of that until the election happens."
October futures prior to the 9 a.m. EDT open were trading down about 3 cents, but just before trading commenced the October futures surged to $2.81, up 4 cents from Tuesday's settlement.
"We like the mid to low $2.70s as technical support, but a break below that takes us to the mid $2.50 area," the trader said.
Support might get tested with the 10:30 a.m. EDT release of storage data by the Energy Information Administration. Trading following the release of the inventory data has historically been volatilem and prices could move sharply in either direction should the actual figure vary significantly from expectations.
For the week ended Sept. 14 IAF Advisors of Houston is looking for a build of 61 Bcf and United ICAP calculates inventories will increase by 66 Bcf. Industry consultant Bentek Energy predicts a build of 65 Bcf. Last year at this time 89 Bcf was injected and the five-year average stands at 73 Bcf.
Market technicians see a situation where both the bulls and the bears need to prove their cases. Brian LaRose, an analyst with United ICAP, said the bullish argument hinges on when spot futures traded as low as $2.575 in late August, marking the end of a bull market correction from $3.277. He said for this scenario to develop "and open room up to $3.660, $3.127-3.173 must be decisively exceeded."
Bears have it a little easier. "To validate the bearish model, an open room down to $2.428-2.368, $2.764-2.681 must be broken. We suggest patience," LaRose said in closing comments to clients.
Much has been made of the nonresponse of natural gas production to lower drilling rig activity. Indeed, production continues at a high rate, and the latest Baker Hughes Inc. natural gas rig count at 448 is at a 13-year low. Much of the increased gas production, however, stems from a steady population of total rigs, 1,864 but down only 121 from a year ago.
If Raymond James and Associates Inc. analysts are correct, the total U.S. rig count may drop. Analysts said Monday they believed that "U.S. drilling activity will follow" domestic exploration and production company cash flows in 2013 (see Daily GPI, Sept. 18). "We now believe that the 2012 rig count will average about 1,930 rigs. This is down 15 rigs (or roughly 0.75% lower) than our old forecast. Perhaps more important, we are now expecting the 2013 rig count will average about 1,720 rigs, which is down 11% from our 2012 average rig count assumption but up about 1% from our old forecast."
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