Natural gas for Thursday delivery rose 6 cents on average nationally on Wednesday as short-term weather forecasts continued to prove unrelenting in their call for unseasonably warm temperatures. Only a handful of points were in the loss column and many points were up a dime or more. Great Lakes locations were up about 4 cents and Midcontinent locations gained a couple of pennies to a little more than a nickel.
Surprisingly in the the face of a developing storm knocking on the Gulf of Mexico’s doorstep, the November natural gas future’s contract fell 6.7 cents on Wednesday to $3.542, and December was off by 6.3 cents to $3.702. November crude oil gained $2.06 to $104.10/bbl.
A Michigan marketer reported delivery issues and elected to postpone spot market buying. “The price on Consumers came in higher than start of the month [index] so we just decided to wait,” said the marketer. “Our [October] basis on Consumers was 28 cents and that puts us at $3.778.”
There is time for the delivery issues to be resolved and thus was in no hurry to make more purchases, said the marketer. Also “it looks like we went heavier into bid week.”
Temperatures for the end of the week in major metropolitan areas were expected to be more than 10 degrees above average. AccuWeather.com reported that Detroit’s high on Wednesday of 79 would ease to 77 Thursday then to 80 on Friday. The seasonal high in the Motor City is 67. Chicago’s 78-degree high was seen rising to 81 on Thursday and 83 Friday; the normal high is 69. In Milwaukee, Wednesday temperatures were expected to hit 75, climb to 78 Thursday and remain there, well ahead of a seasonal norm of 65.
“A Chamber of Commerce autumn day around Southeast Michigan is being produced by surface high pressure of Pacific origin,” said the National Weather Service. “Full sunshine over the already mild and dry air mass is helping lift maximum temperatures to near 80 at most locations.”
Quotes for Thursday deliveries on Alliance came in 3 cents higher at $3.77, and deliveries to the Chicago Citygates gained 4 cents to $3.72. On Michcon, next-day packages rose approximately 4 cents to $3.78, while Consumers gas changed hands at $3.80, a nickel higher. Dawn gas for Thursday delivery gained 4 cents to $3.98.
Across the Midcontinent next-day prices rose from a couple of pennies to more than a nickel. Northern Natural Ventura gained 4 cents to $3.73, and packages at Demarcation rose about 6 cents to $3.69. Panhandle next-day parcels came in at $3.43, up 2 cents, and NGPL Midcontinent Pool Thursday gas changed hands at $3.55, six cents higher. Oklahoma Gas Transmission added 5 cents to $3.56.
At other market centers, gains were commonplace. Gas bound for New York City on Transco Zone 6 rose by 3 cents to $3.75, while Henry Hub next-day packages gained 5 cents to $3.61. On El Paso, Permian gas was 8 cents higher at $3.53. SoCal Citygates Thursday gas came in at $3.78, up 5 cents.
A New York floor trader ventured that technical support could be found at Wednesday’s settlement, and if prices were to advance,”there is not much to keep it over $3.60. If the market were to fail up against $3.63, it would drift down to the $3.40s and $3.30s.”
The weekly storage figures are to be released at the normal time Thursday morning despite the government shutdown, and estimates seem to be coalescing around a 95 Bcf increase, well above last year’s 77 Bcf injection and a five-year average build of 82 Bcf. A Reuters survey of 25 industry cognoscente revealed an average 94 Bcf with a range of 89 Bcf to 101 Bcf. Analysts at IAF Advisors predict a 93 Bcf increase, while Bentek Energy expects a a 94 Bcf gain.
Citi Futures Perspective analyst Tim Evans is calculating a 100 Bcf increase and sees the year-on-five-year surplus growing to 130 Bcf by mid-October. “We think nearby futures could fall to $3.25 or less under the weight of this pressure, with storage operators wanting to see a clear margin on any late volumes added to inventory,” he said in comments to clients.
Evans’ recommended short position in the November contract was initiated Tuesday at $3.64 when November traded as high as $3.653. “We recommend using a protective buy stop at $3.84 to limit risk on the trade. On a break below $3.50, we would lower the buy stop to $3.74.”
INTL FC Stone Vice President Tom Saal said the recent downtrend in the deferred strips is “waning.” He pointed to a steady if not rising calendar 2014, 2016, and 2018 strips. The calendar 2018 strip is showing a bullish divergence as well. In his work with Market Profile, Saal expects the market to test Tuesday’s value area at $3.637-3.611 followed by a test of $3.546-3.520. “Eventually” he anticipates a test of $3.827-3.761.
Despite signs of favorable long-term trends, Addison Armstrong of Tradition Energy expects prices to struggle in the weeks ahead. “Prompt gas prices, other than on last week’s post-storage report swoon to $3.402, have spent more than a month trading above $3.50 on the back of some coal-to-gas switching and increased industrial demand for gas. But the near-record production levels of gas and the arrival of slack demand shoulder season weather are likely to provide significant resistance to rising gas prices in the coming weeks.”
An area of low pressure in the northwest Caribbean continues to produce scattered, disorganized thunderstorms, but is becoming better organized, and the National Hurricane Center (NHC) in its 2 p.m. EDT Wednesday report pegged the likelihood of the system becoming a tropical cyclone at 70% in the succeeding five days (see related story). The system is expected to move over the Yucatan peninsula and into the Gulf of Mexico.
Because of the federal government shutdown, NOAA.gov and most associated websites were unavailable, according to NHC. “However, because the information this site provides is necessary to protect life and property, it will be updated and maintained during the federal government shutdown.”
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