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Broad Heat Lifts Most Quotes; Futures Retreat
The physical natural gas market for Tuesday delivery rose by 7 cents on average Monday as broad market strength was more than able to offset double-digit declines in the Marcellus Shale. Only a few scattered points along with the Marcellus lost ground, and most locations added close to a dime or more.
At the close of futures trading November had slipped 2.9 cents to $3.560 and December was down 4.0 cents to $3.729. November crude oil dropped 54 cents to $102.33/bbl.
Warm temperatures were enough to lift quotes as above normal readings were expected to envelope the Mid-Atlantic, Ohio Valley, and Midwest. AccuWeather.com predicted Monday’s high in New York City of 74 would rise to 78 by Tuesday before reaching 85 on Wednesday. The normal high in New York City at this time of year is 59. Pittsburgh’s high of 71 Monday was expected to climb to 76 Tuesday and to 79 Wednesday. The typical late September high in Pittsburgh is 58. Chicago’s high reading of 72 Monday was forecast to jump to 81 on Tuesday and Wednesday, well ahead of the seasonal norm of 70.
The National Weather Service in Pittsburgh said “a ridge of high pressure will remain in control through Thursday with dry conditions and temperatures to average 5-10 degrees above normal.”
Next-day power prices also added a supportive undertone to the market. IntercontinentalExchange reported that Tuesday peak power at the New England Power Pool’s Massachusetts Hub rose $1.98 to $36.98/MWh, and next-day peak power at the PJM West Interconnection added $7.75 to $46.04/MWh.
Gas for Tuesday delivery at the Algonquin Citygates was quoted 16 cents higher at $3.58, and parcels into Iroquois Waddington added a 4 cents to $3.72. Gas on Tennessee Zone 6 200 L rose by about 19 cents to $3.61.
Other eastern points firmed as well. On Dominion, Tuesday gas came in at $3.30, 2 cents higher, and at Tetco M-3, gas for next-day delivery was $3.48, 6 cents higher. Gas headed for New York City on Transco Zone 6 rose by 20 cents to $3.65.
At the Chicago Citygates, gas came in at $3.63, 14 cents higher, and on Northern Natural Ventura, next-day gas was quoted at $3.75, 32 cents higher. On Michcon Tuesday gas changed hands at $3.64, down 6 cents, while at Dawn next-day gas was seen at $3.77, a penny higher.
While most cash quotes were headed north, Marcellus locations turned tail and ran the other way. Deliveries to Transco-Leidy Line dropped about 18 cents to $2.73, and gas on Tennessee Zone 4 Marcellus plummeted 45 cents to $1.48.
MDA Weather Services in its one- to five-day outlook showed a broad fairway of above to much above normal temperatures bounded by North Dakota and New Mexico on the west, to the Eastern Seaboard excluding Florida. The Pacific Northwest is forecast to be below normal.
Futures traders were uninspired by the day’s performance, but some see prices trading within a range of $3.50 to $3.75. They said upcoming hefty storage builds had been priced into the market.
Traders and risk managers see the time approaching to begin probing the long side of the market.
Devo Capital Management President Mike DeVooght said the market has been able to hold important technical support levels in spite of last week being down.
“As we approach the heating season, we should see good support in the low $3 range. On a trading basis, we will start to be less aggressive on the short side and start to probe the long side of the market if the spot contract trades into the $3.30-3.40 range. We also will book profits on our short speculative positions Monday morning. We will hold our short producer hedges.”
DeVooght suggests that end-users stand aside the market, but producers should continue to hold short a November-March strip from $4.50-4.60.
Tom Saal in his work with Market Profile noted some buying interest in the back years, calendar 2014, 2016 and 2018 and said, “buyers be ready.” He expects the market to test last week’s value area at $3.600-3.502 and then test $3.827-3.761.
The season is approaching for stout storage builds. Energy Metro Desk in its Early Bird Survey of 17 traders and analysts for the upcoming storage report showed an average 94 Bcf with a range of 82-100 Bcf. According to editor John Sodergreen, the five-year average is 82 Bcf and last year, 77 Bcf was injected.
In its 5 p.m. EDT report, the National Hurricane Center said Tropical Storm Jerry was located about 1,240 miles east of Bermuda and was expected to begin moving erratically. It was packing winds of 40 mph and was moving to the east at 7 mph.
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