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Cash Heads North, Futures South; Traders Mull EIA-Less Thursday

Physical gas for Thursday delivery gained overall on average 3 cents in Wednesday's trading. Gains were widespread, with Gulf points solidly in the black, although Midcontinent constraints prompted lower prices at some Midcontinent pipelines. Major market hubs for the most part were within a few cents of unchanged.

At the close of futures trading, November eased 2.1 cents to $3.769 and December was off 3.0 cents to $3.905. November crude oil added $1.08 to $102.29/bbl.

In the Midcontinent, producers reported difficulty getting gas into the NGPL Midcontinent Pool. "We are seeing constraints on NGPL and it is forcing supply onto other pipelines such as ANR SW, Panhandle, and OGT," said an Oklahoma producer. "When you get these constraints it becomes very difficult to manage. There isn't a lot of available storage on these pipelines so what do you do with it?"

Quotes for next-day gas on ANR SW fell 5 cents to $3.70, and on Panhandle gas for Thursday delivery shed 5 cents to $3.61. Gas on Oklahoma Gas Transmission dropped a penny to $3.66, and deliveries on NGPL Midcontinent Pool added a penny to $3.86.

Weather forecasters reported an extended front from the Lower Mississippi Valley to New England. "To the east, a more extensive cold front will stretch from Texas to Michigan, bringing widespread rain and thunderstorms to several regions [Wednesday]," said Wunderground.com meteorologist Kari Kiefer. She added that "showers and thunderstorms will stretch from the Lower Mississippi Valley, through the Appalachian states and into the Northeast [but] the majority of the East Coast will stay clear of precipitation through the evening as the cold frontal boundary stays several hundred miles inland."

The near-term temperature outlook calls for temperatures to remain at or above seasonal norms. Wunderground.com predicted that the high of 70 in New York Wednesday would reach 75 on Thursday before easing to 68 on Friday. The normal high this time of year in New York is 64. Pittsburgh's high of 70 on Wednesday was expected to drop to 66 Thursday before sliding to 63 on Friday. The seasonal high in Steel Town is 63. In Chicago, the high Wednesday of 61 was anticipated to hold through Thursday before rising to 64 on Friday. The normal mid-October high in Chicago is also 63.

Major market centers were mostly mixed. On Dominion, gas for Thursday rose 4 cents to $3.54, and at the Chicago Citygates next-day deliveries were quoted at $3.94, down a penny. Gas for Thursday delivery on El Paso Permian was seen at $3.76, down 3 cents, and at PG&E Citygates next-day gas changed hands at $4.15, up 2 cents.

Gulf points gained a couple of cents. Deliveries on ANR SE rose 2 cents to $3.78, and gas on Columbia Gulf Mainline added 3 cents to $3.82. Packages on Transco Zone 3 gained a couple of pennies to $3.84, and at the Henry Hub, Thursday gas was seen at $3.85, up 2 cents. Deliveries on Tennessee 500 L added 2 cents as well to $3.82.

Although the Energy Information Administration (EIA) will not issue its normal 10:30 a.m. EDT storage report due to the government shutdown, analysts still have calculated their estimates. United ICAP analysts are looking for a build of 80 Bcf, and a Reuters survey of 24 traders and analysts revealed an average 80 Bcf as well, with a range of 73 Bcf to 91 Bcf. Industry consultant Bentek Energy calculates a 70 Bcf injection utilizing its flow model, but cautions of risks due to supply disruptions associated with recent Tropical Storm Karen.

"Bentek estimates that the storm impacted approximately 8 Bcf in offshore production before returning to pre-storm levels," the company said in a report. It added that the shortfall from Karen "was compounded by flows from the Southeast to the Northeast increasing by more than 0.3 Bcf/d week-over-week as res/comm demand in the Northeast rose by 0.8 Bcf/d from the previous week. The increased flows from the Southeast cut Bentek's sample of producing region injections by 4 Bcf from the previous week."

Based on Wednesday's oil market's reaction to the absence of its normal EIA inventory report, a California trader thought natural gas futures would trade without the typical Thursday volatility.

Weather forecasts turned cooler overnight Wednesday. Commodity Weather Group in its morning six- to 10-day outlook showed more aggressive cold throughout the middle of the country. "The combination of consistency and some colder model guidance [Wednesday was] helping to boost confidence on lower temperature expectations over the upcoming six-15 day, especially targeting the Midwest, but with also some spillover cooler to colder impacts for the East and South, too," said President Matt Rogers. "The powerful blocking over the Alaskan and Gulf of Alaskan area looks to drive a series of progressively stronger early season cold pushes into the Midcontinent starting next week and carrying through the 11-15 day for the time being."

Analysts saw Tuesday's slide as the result of profit-taking as futures retreated from a four-month high. Tim Evans of Citi Futures Perspective saw the selling "despite a temperature forecast that looked more supportive than a day ago, particularly in the 11-15 day period. The weakness looks as though prices have reached a level that already factors in the strongest heating demand of the season, with the balance of risk versus reward somewhat less attractive at the higher levels."

In Evans' view, the lack of government storage data on Thursday makes industry estimates "take on greater importance in the absence of a more authoritative measurement." Evans' model shows a hefty 90 Bcf build, and his sampling "so far is small, but we see potential for the consensus to settle somewhere in the 75-80 Bcf range, a relatively neutral level compared with the 75 Bcf five-year average for the week ended Oct. 11, and a clear step below our model's 90 Bcf figure."

Tom Saal, vice president at INTL FC Stone, utilizing trend analysis and stochastics, sees strength in calendar 2014, 2016 and 2018 beginning to wane. He expects the November contract to test Tuesday's value area at $3.825-3.793 followed by a test of $3.703-3.685. Eventually, he sees a test of $3.642-3.592.

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