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Cash and Futures Wrestle Each Other Lower
Cash natural gas prices fell by a nickel on average Tuesday as a handful of multi-dollar gains posted on Northeast pipes were unable to offset a broad retreat at Great Lakes, eastern and most other locations, as well as a weak screen. At the close of trading January futures had given up 5.2 cents to $3.539 and February had eased 5.3 cents to $3.562. January crude oil fell 59 cents to $88.50/bbl.
In the Great Lakes prices softened even though expectations were for temperatures to fall to just above or just below normal. Forecaster Wunderground.com predicted the high in Midland, MI, of 54 Tuesday would drop to 39 both Wednesday and Thursday. The normal high in Midland is 37. Chicago was forecast to see its high Tuesday of 54 slide to 37 Wednesday before rising back to 46 on Thursday. The seasonal high in Chicago is 39.
Marketers in the Great Lakes were able to make albeit modest but nonetheless timely purchases. “We did buy some gas on Consumers at $3.625 [Tuesday], which is below index, and we wanted to buy while prices were better,” said a Michigan marketer. “We didn’t buy all that much because we were concerned about how the rest of the month was going to shake out. We didn’t want our customers to have too much of an inventory, and we only bought for a couple today [Tuesday] and we think we might be done for the month with the rest of our customers.”
The National Weather Service in Chicago said a secondary cold front would pass through the region Tuesday evening bringing sharply colder temperatures at least temporarily. It “has stronger northwest surface winds in its wake…with temperatures in the 30s. This will pass this evening allowing for a steady temperature drop throughout the night. Lows Wednesday morning will be 15 to 20 degrees cooler than Tuesday morning…but still run around 5 to 8 degrees above normal for early December,” the forecaster said.
Quotes at the Chicago Citygate skidded 9 cents to $3.44, and gas on Michcon slipped about 6 cents to $3.52. On Consumers Wednesday deliveries came in 3 cents lower at $3.61, and on Alliance next-day parcels were 8 cents lower at $3.47. Gas at Dawn dropped 5 cents to $3.84.
Next-day gas at Northeast points shot higher as prompt power prices provided a springboard to lift bids. IntercontinentalExchange reported that peak day-ahead locational marginal prices at the New England Power Pool’s Massachusetts Hub jumped a stout $10.65 to $57.81/MWh and peak real-time power Wednesday at PJM’s western hub added $3.87 to $36.88/MWh.
Northeast prices seemed little fazed that Wednesday temperatures throughout the region would remain well above normal. Wunderground.com predicted Tuesday’s high in Boston of 55 would rise to 57 on Wednesday before sliding to 41 on Thursday. The normal high in Boston is 45. New Haven, CT’s 59 high Tuesday was expected to slide to 54 on Wednesday and 43 on Thursday, just at the seasonal norm.
Even with the outlook for mild temperatures, next-day gas at the Algonquin Citygate zoomed about $1.54 to $6.30, and deliveries on Tennessee Zone 6 200 L surged $1.77 to $6.48. Gas into Iroquois Waddington was about 46 cents higher at $4.78.
Toward the south, other locations were more representative of the overall market weakness. Tetco M-3 was quoted at $3.61, 3 cents lower, and gas on Dominion tumbled 9 cents to $3.24. Gas bound for New York City on Transco Zone 6 slid 5 cents to $3.65.
Producing areas such as the Rockies were hit with a number of double-digit losses. Opal was hammered with a 14 cent loss to $3.24, and Northwest Pipeline WY shed 12 cents to $3.21. CIG was sacked for a 10 cent loss to $3.15, but at the Cheyenne Hub next-day deliveries were 12 cents lower at $3.22. Gas on Questar skidded 15 cents to $3.15.
Futures traders were looking for the market to consolidate at somewhat lower prices before Thursday’s inventory report. “We’ve been in something of a downward spiral here for the last couple of days. With the warm weather in place we will probably sit here between this $3.45 to $3.60 range until the report comes out on Thursday,” said a New York floor trader.
If heating requirements in major energy markets are a determinant of natural gas usage, Thursday’s Energy Information Administration storage report is likely to be close to historical norms. The National Weather Service (NWS) forecasts above-normal heating requirements for the Mid-Atlantic and New England but slightly below-normal usage in the Midwest.
For the week ended Dec. 1 NWS reported that New England saw 230 heating degree days (HDD), or 30 more than normal. New York, New Jersey and Pennsylvania endured 204 HDD, or 19 more than normal; and the greater Midwest from Ohio to Wisconsin had 209 HDD, or three fewer than normal. According to EIA figures, last year a thin 14 Bcf was pulled from storage, and the five-year average is for a 51 Bcf draw.
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