NGI Archives | NGI All News Access
California Points Steady, Northeast Plunges, and Futures Creep Lower
Physical natural gas prices across the country retreated on average by about 7 cents Monday, but Northeast locations had to endure double-digit losses, and in southern California prices were flat to a couple of cents higher. At the close of futures trading the April contract was down by 5.5 cents to $2.269 and May futures had fallen 5.2 cents to $2.373. April crude oil dropped $1.06 to $106.34/bbl.
At southern California points, average prices crept into the plus column as traders noted a moderate cooling coupled with showers that were expected to move through the area. “There’s a little cold here but it is not much, but it is supposed to get cool and rainy by the weekend.” said a physical trader for a southern California utility.
He noted that might have put something of a bid under the market, and “the basis has gotten stronger. April basis has jumped up to +9 cents and last week it was trading about +4, but went down to flat.”
The trader noted also that his storage was quite high, but his company wasn’t under any pressure to remove gas by the end of the heating season. “We are over 50 Bcf higher than last year, and it should be weakening basis, but it isn’t. [TransCo] Z6 is trading less than us. Z6 traded $2.29 for tomorrow and we traded [SoCal] Citygate at $2.36. It is not too often that our gas is more expensive than New York.”
Of the points in positive territory SoCal Citygate led the charge higher posting a gain of just less than a dime. Other locations traded flat. SoCal Border and El Paso Mainline South were unchanged.
In the Midcontinent price declines were representative of the market weakness overall. ANR SW was quoted close to a dime lower and NGPL Midcontinent shed just over a nickel. Panhandle was off approximately a penny, and Oklahoma Gas Transmission was quoted close to a dime lower.
Northeast prices plunged. The Weather Channel reported the high in Boston Tuesday would reach 67, 23 degrees higher than normal. By the end of the week the high was expected to retreat only slightly, down to 60.
“It’s a little warmer,” a northeast trader said. “Utilities don’t plan for 65 degree weather in the middle of March so some of the gas is coming out of baseload. It has to go somewhere.”
In spite of the weak market, opportunities will sometimes arise. “It’s kind of interesting some of the gas we were selling today was coming in from Canada and we ended up buying back the New England gas. We picked up quite a bit doing that. The premium market was the Canadian border relative to the New England market,” he said.
Tennessee Zone 6 200 L was seen over a half dollar lower, and Iroquois Waddington shed about 30 cents. Algonquin Citygate was quoted over a half buck lower and thinly traded Dracut was seen over 60 cents down.
Futures prices were lower on light volume. “We only traded in a five and a half cent range, and April volumes were only about 85,000,” said a New York floor trader. He added that near term technical support in the low $2.20s was being closely watched, and if prices should break below that, the next technical level was down at $2.12. “Everyone keeps talking a $1 handle,” he said.
According to government figures directional traders bailed on long positions at a rate about three times greater than they liquidated short holdings. For the week ended March 6, the Commodity Futures Trading Commission in its weekly Commitments of Traders Report showed on balance a reduction in holdings of both long and short options and futures at both the IntercontinentalExchange and the New York Mercantile Exchange.
At the IntercontinentalExchange long futures and options (2,500 MMBtu per contract) declined by 71,270 to 584,498 and short positions contracted 62,642 to 260,818. At the New York Mercantile Exchange long futures and options (10,000 MMBtu per contract) rose by 6,372 to 212,758 and short holdings increased by 11,924 to 299,118. When adjusted for contract size, long contracts at both exchanges fell by 11,445 and shorts fell by 3,736.
For the five trading days ended March 6, April futures fell 16.3 cents to $2.356.
Weather forecasts continue to show a broad pattern of much-above-normal temperatures in the Midwest and East. Commodity Weather Group in its six- to 10-day forecast shows temperatures ranging from 8 to 15 degrees above normal east of a line from North Dakota to South Texas. Below-normal temperatures are expected from the Great Basin west to the Pacific coast.
“A very warm pattern continues to dominate the story for the Midwest, East and South. While some day-to-day variability issues offer some forecast risk, the models are in excellent agreement again on the big picture very warm situation,” said Matt Rogers, president of the firm. “They are also showing consistency on a trend to start weakening the warmth by the second half of the 11-15 day. A cool front makes an attempt to push into the Midwest and East around days 13-15.
How much that warmth will weaken remains to be seen, but Rogers is “keep[ing] the system very weak with only modest/slow fading of the very strong warming. The models also start to gradually dry and warm the West in the 11-15 day after a chilly and very unsettled (lots of mountain snows) pattern for the one-10 day range.”
Risk managers see last week’s storage number as the culprit driving prices to new contract lows and are reluctantly about placing hedges to cover any summer price weakness. “The storage number showed a smaller draw than expected and continues to be well above last year’s levels. This news and the continued negative fundamental outlook continued to push prices lower,” said Mike DeVooght, president of DEVO Capital Management, a Colorado-based trading and risk management firm.
DeVooght is a seller on rallies. “On a trade basis, we will continue to hold current positions and view any significant rally from current levels as an opportunity to do some forward sales in the summer strip. At this time, and at these price levels, we are not excited about establishing new hedges here. But we are going to purchase October $2.50 puts to cover the summer strip. We will use a stack and liquidate strategy,” he said in a weekend note to clients. DeVooght also advises end-users and trading accounts to stand aside.
Â©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |