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Weather Fuels Broad Gains; Futures Add a Dime

Physical gas for Tuesday delivery vaulted higher in Monday's trading as weather forecasts turned more summer-like and heat and humidity was expected across major Eastern Seaboard locales. Gains were widespread and the national average was up 18 cents.

Forecast increasing power loads and higher next-day peak power prices also added to the incentive for next-day gas purchases. Gains surpassed $1.00 at some New England locations and the overall market advance was a stout 13 cents. The futures managed to take something from the cash market playbook and recorded an advance of their own.

At the close, September had risen 9.7 cents to $3.937 and October was higher by 9.6 cents to $3.979. October crude oil fell 30 cents to $93.35/bbl.

Forecasters cautioned not to put away the swim suits just yet as "some late-summer warmth is on the way in the Northeast," said AccuWeather.com meteorologist, Alex Sosnowski. "While the lack of extreme heat will continue in the Northeast, weather more typical of midsummer is in store for the region for a time this week.

“High temperatures will reach well into the 80s F across New England and the central Appalachians, and can reach near the 90-degree mark along the Interstate 95 corridor during the middle of this week. Temperatures in this range are between 5 and 10 degrees above average for late August."

Sosnowski said the “heat will expand from the Midwest for a one- to three-day visit. The overall warmest day will be Wednesday. The combination of temperature, humidity, sunshine and other factors will result in [heat index] temperatures approaching 100 F for a few hours during the afternoon, especially from Philadelphia on south."

Boston's high of 81 on Monday was forecast to reach 84 Tuesday and 88 Wednesday. The normal high is 78. New York City's 88 high on Monday was seen dipping to 86 Tuesday then rising to 90 on Wednesday; the seasonal high is 82. Philadelphia's 87 high Monday was predicted to hold for Tuesday before reaching 90 on Wednesday, well above the seasonal high of 84.

Power loads and next-day power prices rose. The New York ISO forecast that Monday peak power of 23,875 MW would rise to 24,943 MW Tuesday and hit 25,632 MW Wednesday. ISO New England said Monday's expected peak load of 19,610 MW would reach 21,110 MW Tuesday and climb further to 21,790 MW by Wednesday.

Peak next-day power prices also provided a firm framework for next-say gas purchases. IntercontinentalExchange said peak Tuesday power at the ISO New England Massachusetts Hub rose $8.50 to $45.00/MWh and next-day peak power at the PJM West terminal gained $5.75 to $47.79?MWh.

Gas at the Algonquin Citygates surged 97 cents to $3.19, and gas on Iroquois Waddington rose $1.04 to $4.02. Deliveries on Millenium came in 47 cents higher at $2.43.

Mid-Atlantic prices also jumped. Gas bound for New York City on Transco Zone 6 rose 83 cents to $2.69, and deliveries to Tetco M-3 added a stout 67 cents to $2.54.

On Columbia Gas TCO, next-day prices rose a nickel to $3.95, and on Dominion South Tuesday, packages changed hands 30 cents higher at $2.30.

Marcellus points jumped higher with parcels at Transco Leidy rising 45 cents to $2.28, and deliveries to Tennessee Zone 4 Marcellus rising 43 cents to $2.22.

Warm temperatures in the central portion of the country should lift consumption.

"Demand in the central part of the country will remain elevated as temperatures from Texas to the Midwest are forecast to run several degrees above normal [Monday] through week’s end," said industry consultant Genscape Inc.. "Houston will be 2 degrees above normal but with heat indices into the 100s; Dallas will be 5 degrees above normal through Wednesday; and Chicago will be 9 degrees above normal today.

“In East Texas, evening nominations for [Monday’s] flows put demand above 1.61 Bcf/d, bringing the month-to-date average of 1.60 Bcf/d, just 0.01 Bcf/d shy of the record set in 2011. “In the Midcontinent, weekend demand nominations crest 2.5 Bcf/d, lifting the month-to-date average to 2.37 Bcf/d. Despite the bump, both August and summer-to-date demand levels in the Midcontinent are on pace to set record lows for the region."

On Alliance, gas for delivery Tuesday rose 3 cents to $3.97, and gas at the Chicago Citygates added 2 cents to $3.96. Gas at Demarcation was seen 2 cents higher at $3.94, and deliveries to Northern Natural Ventura gained 3 cents to $3.93.

A Sunday evening outage on the CME platform had little impact on natural gas traders. There were technical issues resulting from software changes made over the weekend as part of ongoing upgrades to technology, a CME spokeswoman said.

"It's a Sunday evening time period and trading is usually thin unless there is a gigantic weather story which you don't really have," said Tom Saal, vice president at INTL FC Stone in Miami. "We knew when we transferred everything from the floor to electronic sometimes things would happen. Apparently they haven't built in enough redundancy."

Prices rose overnight Sunday as forecasters called for warmer temperatures. WSI Corp. in its Monday outlook said the six-10 day forecast “is generally a bit warmer across the Midwest into the East, as well as the Southwest. The Northwest and Rockies are a bit cooler. This is a function of the period shift and model trends. Confidence in this forecast is average based on rather good medium-range model agreement. As usual, there are typical technical and timing differences to note.

"The forecast may trend cooler across the northern tier, mainly the Northwest into the Upper Midwest. The southern U.S. has a slight upside risk, focused across Texas into the desert Southwest."

The load-killing effect of Tropical Storm Cristobal may do its share to increase storage builds as it tracks to the north and northeast from its present position north of the Bahamas. At 5 p.m. EDT on Monday, the National Hurricane Center (NHC) reported Cristobal was about 670 miles southwest of Bermuda and was moving to the north northeast at 5 mph. Maximum sustained winds were 60 mph, and NHC projected that the storm would move up the East Coast, before turning out to sea.

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