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Weekly Gains Seen Across The Board

Price-wise it was a solid week for natural gas as all regions of the country posted double-digit gains with the exception of the infrastructure-challenged Northeast. Only a handful of points slid into the loss column. Nationally, prices averaged a 13 cent gain to $3.74, while regionally the Rocky Mountains outdid everyone with a 21 cent gain to $3.74. The Northeast lagged the pack with a modest 4 cent advance. Of individual points, Northwest Sumas posted the greatest move rising 25 cents to $3.83 and Tennessee Zone 4 Marcellus had the largest loss of 49 cents to $1.47.

South Texas and South Louisiana both added a dime to $3.73 and $3.75, respectively, and East Texas and the Midwest rose by 11 cents to $3.73 and $3.89, respectively.

California notched a hefty gain of 15 cents to $3.93 and the Midcontinent saw regional prices average a 17 cent rise to $3.72.

November futures slid 1.2 cents to $3.764.

In Friday's trading natural gas for weekend and Monday delivery skidded 7 cents on average. Nearly all points recorded losses, with some locations falling deep into double-digit declines. Great Lakes points were off a couple of pennies, but Northeast and East locations suffered major setbacks. At the close of futures trading, November had added 0.7 cent to $3.764 and December was 1.1 cents higher at $3.897.

Futures traders were optimistic following Friday's meager gains. "The market looks a little firm, and I think we will test into the low $3.80s next week. "With the two storage reports next week, it should be interesting," said a New York floor trader.

In its noon Friday update, weather forecaster 12ZModelRuns.com showed below-normal temperatures in the 11- to 15 day period occurring both along the East Coast and New England, but also in the Upper Midwest.

Addison Armstrong of Tradition Energy in a Friday morning report to clients suggested that "the approaching start of this winter heating season and expectations for increasing industrial demand in the coming months could provide support." However, in the near term futures have "declined a little more than seven cents to a six-day low at $3.685 in heavy volume (15K lots) as revised weather forecasts for slightly warmer weather in the latter part of this month and the early part of November weigh on the market. After reaching nearly a four-month high at $3.869 earlier this week, gas prices have reversed and dropped nearly 5% amidst light profit-taking and fluctuating weather forecasts."

Tom Saal of INTL FC Stone in Miami was getting "mixed signals" from the more deferred contracts, specifically Calendar 2014, 2016 and 2018. He advises buyers to consider hedging "this winter on this sell-off." In his work with Market Profile, he looks for the market to test Thursday's value area at $3.757 to $3.739 before moving on and testing $3.859 to $3.819, $3.703 to $3.685, and $3.642 to $3.599. Saal is not certain in what order these value areas are likely to be tested.

Futures traders last week were forced to do without their usual access to government storage data, but the Energy Information Administration said Thursday that with the U.S. government back at work it would double up on storage reports next week. It said that its natural gas storage report for the week ending Oct. 11 will be released at 10:30 a.m. EDT on Tuesday, Oct. 22, with the report for the week ending Oct. 18 coming two days later at its regularly scheduled time of 10:30 a.m. EDT on Thursday Oct. 24. With two storage reports in one week increased volatility may be in play.

Marketers working the Chicago Citygate market Friday saw the area retaining its elevated pricing relative to eastern and Gulf points. "Unless some weather comes into the East, it should stay premium to the Gulf and East. There are issues all over the place," said a Houston-based marketer trading the Midwest.

"No matter where you turn, you are running into problems in the Midwest right now. Deliveries into Consumers and any of the Chicago Citygates are problems. I don't know whether they are doing late-season maintenance or what, but everything I try to move around there is just one constraint after another.

"Peoples has shut down most of the gates they are taking gas from, and Midwestern has improved some of their throughput. Nicor doesn't want gas off any of the gates, so they have OFOs in place. I guess they are full. Nicor and Nipsco have storage, but everything else is off-system," he said.

Weather forecasts for the region hovered around seasonal norms. Wunderground.com predicted the high in Chicago Friday of 61 was expected to ease to 59 Saturday but rise back to 64 on Monday. The normal high in the Windy City is 62. Milwaukee's high Friday of 52 was anticipated to reach 54 Saturday before sliding to 48 on Monday. The normal high in Milwaukee is 59. Detroit's Friday high of 63 was forecast to slip to 55 Saturday before rising to 59 on Monday. The normal mid-October high in Detroit is 57.

The National Weather Service (NWS) in Chicago reported "late [last] week [would] be seasonal before a very brief cool-down Saturday night and warm-up Sunday. However, no good weather day goes unpunished as below-average temperatures are expected for most of [this] week...possibly bringing Chicago its first frost of the season."

Weekend and Monday gas into the Chicago Citygates was quoted at $3.85, down 2 cents, and on Alliance gas was seen at $3.83, down 2 cents. On both Consumers and Michcon, gas changed hands at $3.83, down 2 cents, and at Dawn weekend and Monday packages came in at $3.92, down 3 cents.

Northeast and East points were in a free-fall. Algonquin Citygates were seen 38 cents lower at $3.50, and deliveries into Iroquois Waddington fell 3 cents to $3.90. On Tennessee Zone 6 200 L, parcels for the weekend and Monday dropped 20 cents to $3.69.

Monday peak power prices did not help the cause. IntercontinentalExchange reported that Monday power at the New England Power Pool's Massachusetts Hub fell $2.57 to $39.01.

Eastern points fared little better. Deliveries to Dominion fell 14 cents to $3.39, and on Tetco M-3 weekend and Monday gas fell 30 cents to $3.46. Gas bound for New York City on Transco Zone 6 fell 30 cents to $3.50.

The NWS in New York City forecast that a series of systems would impact the area. "[H]igh pressure will slide to the south tonight [Friday]. Weak low pressure will pass to the Southeast Saturday into Saturday evening...while a cold front approaches from the West. The front will move through late Saturday night...followed by another high sliding to the South Sunday through Monday. Another cold front will move across Tuesday...followed by weak high pressure on Wednesday. Low pressure developing near the middle Atlantic Coast will track northeast during the second half of the week."

Longer term Commodity Weather Group in its Friday morning six- to 10-day outlook still called for pervasive cold over the eastern half of the country, but according to Matt Rogers, president of the firm, "Like [Thursday's] update, we see some colder changes in the Midwest, South, and East next week, but still see some warmer adjustments especially toward the second half of the 11-15 day as the jet stream starts to flatten again."

In Thursday's trading natural gas prices for Friday physical delivery on average fell 9 cents overall. It was a tale of two coasts as West Coast points suffered hefty double-digit losses within a weak power environment and a nominal weather outlook. East Coast locations were mixed with prices a few pennies on either side of unchanged. Futures traders saw no market impact from the absence of weekly inventory data, and at the close November had eased 1.2 cents to $3.757 and December was lower by 1.9 cents to $3.886.

Futures traders were watching closely as the 10:30 normal release time for Energy Information Administration (EIA) storage data approached. "We were looking to see if the market would move around the 10:30 mark to see if someone had some kind of inkling about anything but it didn't. It stayed exactly where it was," said a New York floor trader.

The trader said volume "was a little less than normal. We are currently [10:30 a.m. EDT] about 70,000 contracts. On a typical report day we would be seeing these kinds of numbers, maybe 10,000 either way. Most of the time the market will make a move in either direction and within a 20 minute time span it settles in to either side of a penny up or down. The market hasn't gone anywhere. I think it will cause more volatility than normal for next week," he said.

Volatility or not here's where storage stands now. Working gas in storage is 3,577 Bcf, 138 Bcf less than at this time last year but 55 Bcf more than the five-year average. Estimates vary, but indications are that storage is on track to come very close if not exceed last year's record build of 3,930 Bcf. For that to happen, 88 Bcf would have to be injected during the four remaining weeks of the traditional injection season ending at the end of the month. The word came officially from EIA Thursday morning saying that despite the overnight ending of the federal shutdown, the Weekly Petroleum Status Report and the Weekly Natural Gas Storage Report would not be published on Thursday.

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