The cash market overall gained about 3 cents on average Tuesday as traders cited screen strength and a general tendency for buyers to forsake index pricing and rely on spot shoulder month purchases.
Eastern points were strong as were Gulf locations, but Marcellus points eased. At the close of futures trading, October had gained 8.7 cents to $2.924 and November had added 7.2 cents to $3.105. November crude oil fell 56 cents to $91.37/bbl.
There was some momentary weakness, but it soon gave way to overall underlying market strength. "We saw some pretty good falloffs on intraday trading. [Tennessee] Zone 6 200 L was down to $2.79, and Marcellus traded around $2.20," said an eastern marketer.
"There's no weather, but there have got to be people short and coming out and buying everyday. They are just covering their baseload needs, thinking that prices are going to come off." The marketer added that the relatively low volatility environment of shoulder period trading often led to fewer trading opportunities.
"You have to pick your days, but a lot of times when everybody is selling if you set yourself up short, you can be in pretty good shape," he said. "There's going to be some maintenance on Tennessee for [Tuesday] and the rest of the week that's cutting off about 220 MMcf/d that cut off some SOP (secondary out of path) gas, so intraday may be a little stronger. You should see a little run-up in prices.
"The weather doesn't support any change in demand, but it's a good time for pipeline maintenance."
Mark Ressler, lead meteorologist at The Weather Channel, saw the dominant feature of eastern weather in the form of an approaching cold front. "[S]howers and thunderstorms will develop from West Virginia and northern Virginia to New York and New England midweek. Rainfall may near one inch in western Pennsylvania and West Virginia [and] Virginia and much of the Delmarva Peninsula may stay rain-free."
He said temperatures will be above average but nothing capable of sparking an increase in energy usage. "Lows will range from the 40s and 50s north to the upper 50s and low 60s south. Highs will be in the 60s and 70s."
Quotes on Algonquin rose 5 cents to average $3.11, and deliveries to Iroquois Waddington were flat at $3.13. On Tennessee Zone 6 200 L next-day gas gained 2 cents to $3.12.
Points farther south were stronger. Tetco M-3 came in at $3.01, up 5 cents, and Transco Zone 6 New York averaged $2.99, higher by 6 cents. On Dominion Wednesday gas added 3 cents to $2.84.
Gulf points were firm as the screen gained ground. ANR SE was quoted at an average $2.79, higher by 5 cents, and Columbia Gulf Mainline rose 4 cents to $2.81. At the Henry Hub Wednesday parcels rose by 2 cents to $2.84, and on Tetco E LA next-day gas gained 8 cents to $2.83. On Tennessee 500 L prices rose by 3 cents to $2.84, and Transco Zone 3 was quoted at $2.84, up 3 cents also.
Marcellus points generally underperformed the market. Nearby Millennium Pipeline saw quotes fall 13 cents to $2.64, and Station 313 was 3 cents higher at $2.88. Tennessee Marcellus came in at $2.43, down 17 cents.
Futures traders saw the day's gains resulting from heretofore unconvinced buyers. "Buyers are saying they can be complacent and they don't have to worry, but that is not always a wise move," said a Washington DC broker.
"This has been our theme that there have been a lot of complacent buyers, but at some point that may not be the wisest thing. Sometimes you snooze, you lose. I think there are a lot of people who looked at this and said 'the market is going to fall apart,' and behind the scenes we've been watching some production shut in. Traffic supporting the fracking in Pennsylvania is way down, the sand trucks, the water trucks and things like that.
"At the end of the day, low price takes its toll on low price."
Tuesday's gains notwithstanding, analysts cite the natural gas market as somewhat balanced from both a positive and negative vantage point. "From a pure fundamental perspective, the market would appear to have something for both the bulls and the bears at the present time," said Jim Ritterbusch of Ritterbusch and Associates in a morning report to clients.
"Bullish traders can cite a dramatic reduction in the supply surplus that approximates some 70% since last spring as a major supportive consideration that has virtually eliminated concerns over storage congestion during the month of October. Within the bearish camp, [there is] the fact that a sizable supply overhang of around 315 Bcf against the averages can also be cited. By and large, we will reiterate a view that significant price swings are driven by dynamic rather than static factors, and with this in mind, odds would appear to favor the bulls into Thursday's EIA [Energy Information Administration storage] report as a further narrowing in the year-over-year supply overhang would appear likely."
Bulls and bears will both have to put up with diminished heating and cooling requirements for major energy markets in the near term. The National Weather Service reported that for the week ended Sept. 29, heating degree day (HDD) and cooling degree day (CDD) accumulations in the East and Midwest were below seasonal norms. New England was expected to see 46 HDD, 12 below normal, and the Mid-Atlantic forecast came in at 35 HDD, or eight below normal. In the Midwest from Ohio to Wisconsin 50 HDD were anticipated, or four above normal. Cooling requirements were almost nonexistent. New England and the Mid-Atlantic were expected to see no CDD or one and five days below normal, respectively. The Midwest was predicted to see one CDD or five below normal.
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