Physical natural gas prices overall jumped on average 7 cents Monday led by double digit gains on the West Coast, and added strength from eastern points. Operational problems in California prompted gains at supply points as far away as the Rocky Mountains. At the close of futures trading October had fallen 4.8 cents to $2.837 and November was 3.8 cents lower at $3.033. November crude oil slid 96 cents to $91.93/bbl.
In Northeast markets prices were mixed amid some market strength overshadowed by the end of maintenance on a major pipeline. Algonquin Gas Transmission finished maintenance at its Cromwell compressor station ahead of schedule on Sunday and said the Cromwell station had been restored to full capacity. Algonquin Citygate prices fell.
"The market has come back to reality. There is a lot of gas," said a Northeast marketer. "There aren't enough places to burn it." He added that the price decline was not unexpected.
"Dawn is typically 33 cents over Nymex which would put it at $3.18 but today we were seeing $3.02 so there are some pretty heavy discounts."
Quotes on Algonquin plunged 44 cents to $3.06 and deliveries to Tennessee Zone 6 200 L fell 2 cents to $3.10. Gas into Iroquois Waddington added 6 cents to $3.13.
Power demand throughout the East proved lackluster. The IntercontinentalExchange reported that day ahead locational marginal prices at the New England Power Pool (Nepool) fell $3.17 to $31.54/MWh and real time peak power at the PJM western hub dropped $1.09 to $33.96/MWh.
Next-day deliveries at other eastern points gained. Gas deliveries for Tuesday on Dominion surged 7 cents to average $2.81 and parcels into Tetco M-3 added 17 cents to $2.96. Quotes on Transco Zone 6 New York added a dime to $2.93.
On the West Coast an operational flow order (OFO) prompted by a low pipeline inventory of Pacific Gas and Electric was enough to lift prices by double digits and reverberate all the way back to Wyoming. PG&E cited pipeline inventory levels below the 4,000 MMcf/d minimum flow rate as prompting the OFO.
At PG&E Citygate next-day gas averaged 9 cents higher at $3.38 and at Malin Tuesday packages were quoted 6 cents higher at $2.78. At Opal gas was seen at $2.75, up 4 cents.
Southern California Citygate averaged 16 cents higher and $3.23 and SoCal Border was 15 cents higher at $3.13. Gas delivered on El Paso S Mainline was 17 cents higher at $3.16.
Midwest points were firm as well. Deliveries to Chicago Citygate averaged 5 cents higher at $2.96 and next-day gas on Michcon was seen at $2.94, up by 6 cents. Deliveries to Consumers gained 6 cents to $2.96 and Tuesday gas on Alliance was 8 cents higher as well to $2.93.
Futures traders were not impressed with the day's move. "We sat in a range all day long and I expect $2.75 will see some activity during options expiration Tuesday. I look for a tight range, $2.70 to $2.90 at least for this week," said a New York floor trader. "$2.70 to $2.72 looks like pretty good support."
Mike DeVooght, president of DEVO Capital advises traders and end-users to stand aside the market for the time being. Producers and those with exposure to lower prices should hold short the remainder of a summer strip at $3.00 to $3.20 and a winter strip at $3.75 to $3.95. He says to sell any winter months above $3.75 to $3.95 for a light position and to continue to hold short the remainder of a stacked October $2.50 put position designed to cover the summer strip for a 25 to 27 cent debit.
"Natural gas continues to trade in its volatile two sided range. The market is healing but this process could be long and drawn out. On a trading basis we will hold current positions," he said in a weekend note to clients.
Commodity Weather Group in its six- to 10-day outlook forecasts above normal temperatures north of a line from Lake Ontario to Los Angeles, but that is not expected to translate into any significant shift in supply-demand balances.
AccuWeather.com predicts the highs in Chicago this week will range from 68 to 76 degrees, right around the normal high of 73.
"Overall, [energy] demand levels are still running relatively low over the next two weeks as the Midwest and East Coast mainly see temperatures inside the range of comfortability. Texas is hotter this week (more 90s) and again in the 11-15 day (80s-90s) compared to previous forecasts," says Matt Rogers, Commodity Weather Group president.
"The cooling in the West in the 11-15 [day forecast] could trigger some above normal early season heating demand, but at least right now, we are not seeing a strong cool outbreak. Every so often, the American models will deliver a much cooler Canadian air mass to the U.S. (Midwest/East) by the 11-15. The thinking right now is that Western cooling in the 11-15 will more gradually shift to the Central U.S. by the latter days of the period (favored by the Euro ensembles)."
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