The overall cash market advanced another 6 cents on average with only a minority of points in the loss column and some locations sporting double-digit gains. Rockies and northern California points were strong as well as the Gulf Coast and the Midcontinent. Much to the delight of market technicians, futures put in a new high, and at the close November was 3.0 cents higher at $3.617 and December had added 4.3 cents to $3.947. November crude oil followed slumping equity markets and dropped $2.05 to $90.05/bbl.
Portions of the Rockies and Northern California experienced surging prices as power prices in the Pacific Northwest jumped and the effects of an earlier drought linger. “Up until recently the Northwest has had kind of a drought, so hydropower production has dropped,” said a Rockies producer. “It looks like the gas is going over to Malin and into PG&E Citygate.”
Not only were next-day gas prices higher in Northern California, but next-day power prices at Northwest points gained as well. IntercontinentalExchange reported that Monday peak power at COB (California Oregon Border) jumped by $5.83 to $39.58/MWh and peak power at Mid C (Mid-Columbia) rose by $7.27 to $40.01.
Rockies points positioned to serve the Pacific Northwest put up double-digit gains. Weekend and Monday gas at Opal gained 13 cents to average $3.53, and deliveries to Northwest Pipeline Wyoming added 11 cents to $3.47. Gas on Northwest Sumas jumped 20 cents to $3.64. Other Rockies pipes were not as fortunate. Deliveries on CIG Mainline were up by 5 cents to $3.33, and at the Cheyenne Hub weekend and Monday gas added 2 cents to $3.34. Questar gas, on the other hand, slipped 2 cents to $3.26.
Northern California points were firm as well. Malin added 6 cents to average $3.53 and PG&E Citygate gained 13 cents to a stout $4.15. SoCal Citygate, however, were down 6 cents to $3.63 and SoCal Border prices managed a 5 cent gain to $3.59. El Paso S Mainline rose a couple of pennies to $3.59 also.
The producer didn’t have much faith that the current rally in gas prices had a lot of staying power. “I’m kind of skeptical of this rally. I think it has a little way to run because we have easy storage comparisons to last year, but we get into November and you have all these Marcellus wells getting tied into the new pipelines, and that is going to put a lot of gas on the market. If you don’t have some weather, look out.
“I think the weather forecasts are as iffy as I have ever heard them. I can show you two [winter forecasts] that say it’s going to be warm and two that say it’s going to be cold. If you look at the last two weeks in the six- to 11-day period, they have flip-flopped between warm and cold about every other day. I don’t know what to believe. I’ll almost believe it when I see it.”
He also said that most people don’t realize that the Friday price was for Saturday, Sunday and Monday. “Forty percent of your unhedged volume is priced for the weekend, and there often can be these weekend meltdowns. There is less demand, so rather than take the risk of a weekend meltdown, or a three-day weekend where we don’t get any weather, it’s often better to just take the index.”
Midcontinent prices were strong but Gulf quotes were stronger. ANR SW was quoted at an average $3.29, up 7 cents, and Panhandle Eastern gas for weekend and Monday delivery added 10 cents to $3.31. Deliveries to the NGPL Midcontinent Pool added 11 cents to $3.38.
At the Henry Hub weekend and Monday deliveries jumped 15 cents to $3.43, and Tennessee 500 L gained 11 cents to $3.42. On Texas Eastern E LA prices added 14 cents to $3.37.
Traders continue to see a strong market in spite of vacillating weather outlooks. “Although the linkage between natural gas prices and equity swings is rather loose, we still viewed today’s price support in the face of the stock market and oil weakness as indicative of a strong market,” said Jim Ritterbusch of Ritterbusch and Associates. “We are favoring a bullish stance on the expectation of additional price gains toward the $4.10 area per December futures. However, we have advised only a base or core long position at current levels as we continue to await a significant correction to establish a more meaningful trade.”
Ritterbusch sees near-term weather favoring the bullish cause. “In any event, higher levels would appear to lie ahead as most weather forecasts have shifted back to the cold side into early November. Updates to the one- to two-week temperature views will continue to dominate most of the near term trade.”
Weather models are now predicting a warm six- to 10-day period but colder than normal in the 11- to 15-day time frame. Commodity Weather Group in its six- to 10-day outlook shows above-normal temperatures across a wide area of the country south and east of Chicago. In the 11- to 15-day forecast, below-normal temperatures are expected to plunge deep into the Ohio Valley and to the east and south as well.
“The big question mark on this morning’s outlook was whether we needed to accelerate or hold steady the timing of the cool-to-cold push for the Midwest, East and South,” said Matt Rogers, president of the firm. “The American models were pronounced in their two- to three-day faster timing deeper into the second half of the six-10. The European models were far more consistent today and preferred by our outlook, although some of the stronger much-below cooling does seem to reach more of the Midwest early in the 11-15 day range. While the models are in excellent agreement on a cool dominated 11-15 day, we are cautious on intensity given the transient look of the air mass. There is a chance — per the American models — that the late-month event could be stronger,” he said in a Friday morning report to clients.
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