Cash prices overall were 7 cents higher Monday on average as prices staged a broad rally with only a handful of points in the loss column. Midcontinent, East, and Northeast locations were strong. Futures trading was generally lackluster for the early part of the session, then declined as traders absorbed a survey showing expectations of lower prices next week. At the close November had fallen 16.5 cents to $3.452 and December had slumped 17.9 cents to $3.768. November crude oil slumped $1.32 on its last trading day to $88.73/bbl.
East and Northeast points rose as initially markets were firm. “[In early trading] Nymex was up a little bit and Henry Hub was higher, but with Nymex coming off you’ll see prices lower Tuesday,” said an eastern marketer.
Weather-wise the gains were difficult to understand. “Temperatures in the Northeast are exactly the same Tuesday as they are expected to be Monday,” the marketer said. “Boston is supposed to see 65 highs and 50 for a low. There’s not really much heating load. Wednesday is a little cooler and Thursday is expected to warm back up.”
Next-day quotes on Algonquin Citygate added 9 cents to $3.77 and deliveries to Iroquois Waddington rose 9 cents to $3.83. Gas on Tennessee Zone 6 200 L rose 12 cents to $3.84.
At Tetco M-3 next-day deliveries jumped 15 cents to average $3.65 and gas on Dominion gained 5 cents to $3.49. Tuesday gas into New York City on Transco Zone 6 was higher by 13 cents to $3.61.
Prices surged at Carthage as earlier restrictions were lifted, offering more market opportunities.
“The two buyers that had the ability to take gas from Carthage were restricting price, and now there are more ways to move the gas out of Carthage for producers. The price at Carthage had been artificially low. There are more options now, a trader said.
Next-day delivery at Carthage jumped 24 cents to average $3.36 and deliveries to the Perryville Hub rose by 4 cents to $3.43.
In the Midcontinent, traders reported early strength, but subsequent weakness. “Our prices on Panhandle and OGT [Oklahoma Gas Transmission] rose at first, and then fell off,” one trader said. “Storage is full in Oklahoma and we don’t know where we are going to take our gas in November. We normally take it to OGT, but they are full. It’s going to be a real pain.”
Gas deliveries on Panhandle Eastern added 2 cents to $3.33 and deliveries on Oklahoma Gas Transmission gained 8 cents to $3.26. Buyers on NGPL Amarillo had to pay 8 cents more at $3.47 and deliveries to the NGPL Mid Continent Pool rose by 2 cents to $3.40. Parcels on ANR SW gained 7 cents to $3.36.
Futures traders saw steady prices for awhile then a tumble. “It seemed like we were trading between $3.61 and $3.62 and then the bottom falls out,” said a New York floor trader.
“You would think the way we came off, we might test down to the $3.35 to $3.37 area where there might be a little bit of support,” he said.
According to a Bloomberg survey futures are expected to decline next week as the outlook for mild weather signals reduced demand for heating . A survey of 10 analysts showed a bias to the sell side. Of the 10, five said futures on the New York Mercantile Exchange would fall through Oct. 26. Four said prices will rise and one said they will stay the same. Last week, “54% of participants said gas would fall this week,” Bloomberg said.
The six- to 10-day outlook over the weekend turned significantly chillier. MDA Information Services in its six- to 10-day forecast shows a broad fairway of below-normal temperatures extending east of a line from Montana to New Mexico and west of a line from Virginia to northern Michigan. New England and California are expected to be above normal.
“This forecast has turned much colder through the Central and Eastern U.S. since Friday. A deep cool trough will work its way from the Central U.S. eastward, while at the same time a potentially strong area of low pressure will work its way northward along the East Coast. These features in tandem with high pressure working southeastward at the surface will combine to produce a significant early season period of cold over much of Midwest, South, and Mid-Atlantic. The large scale themes are well supported among models and the increasingly negative NAO [North Atlantic Oscillation] setup, though details still vary,” the forecaster said.
A cold snap notwithstanding, Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm, said on a week-to-week basis, spot futures changed little and “on a trading basis, we believe a $3.75-4.00 winter strip represents an attractive sell level.” DeVooght points out that the November-March strip is currently priced at $3.946 and the one-year strip is an even $4.00.
DeVooght advises trading accounts and end-users to stand aside, and producers are counseled to “hold short the balance of the winter strip at $3.75-3.95. Continue to sell any winter months above $3.75-3.95 (light position).”
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