The overall cash market added just under a dime on average as forecasts for warmer temperatures, pipeline restrictions and higher power prices at eastern points paved the way for well-bid cash trading. Rocky Mountain quotes were firm as well. At the close of trading July futures fell 2.8 cents to $3.800 and August was off 2.7 cents to $3.821. July crude oil eased 26 cents to $95.77/bbl.
Planned maintenance work by Millennium Pipeline on a compressor station resulted in no non-firm capacity available at 1 delivery point and 4 receipt points for June 11 through June 14, the company reported on its website.
IntercontinentalExchange reported that peak power for delivery Tuesday at the New England Power Pool’s Massachusetts Hub rose $2.00 to $40.62/MWh and power into the New York Independent System Operators’ Zone G delivery point (eastern New York) rose $1.15 to $50.65/MWh. At the PJM West Hub next-day peak power fell $3.44 to $47.24/MWh.
Temperatures in New England were expected to be at seasonal norms to below, and readings at points farther south were forecast to rise above normal by mid week. AccuWeather.com predicted Monday’s high in Boston of 66 would rise to 70 on Tuesday and 73 Wednesday. The normal high in Boston at this time of year is 74. New York City’s Monday high of 70 was predicted to jump to 80 Tuesday and reach 82 Wednesday, 4 degrees above its norm. Philadelphia’s high reading Monday of 77 was anticipated to rise to 83 on Tuesday and 84 Wednesday, 3 degrees above normal.
Quotes at the Algonquin Citygates for Tuesday parcels rose 48 cents to $4.29 and deliveries to Iroquois Waddington added 39 cents to $4.25. Gas on Tennessee Zone 6 200 L rose 54 cents to $4.33. On Millennium next-day gas plummeted $1.81 to $1.56.
On Dominion Tuesday gas was quoted at $3.67, up 16 cents and on Tetco M-3 next-day gas rose 23 cents to $3.89. Gas bound for New York City on Transco Zone 6 gained 26 cents to $3.94.
A Rocky Mountain producer lamented that there was no way out of a lower price regime. “If you listen to American Electric Power, the largest burner of coal in the country, and on their 1st quarter call they said they would start switching back to natural gas between $3.25 and $3.50. We are losing over 5 Bcf/d to coal.”
“Everybody is saying hot weather is going to save us, but I’m telling you hot weather is not going to save us with CAPP [Central Appalachian] Coal at $60 per ton. If you get it hot from California to Maine and Seattle to Key West and all the gas fired peaking units come on, then maybe you have a different deal.”
“If you look at the nuclear forecasts going forward, there are going to be less outages than last year. We are headed to $3.50 [Nymex], maybe lower,” he said.
For the moment Rocky Mountain prices firmed. Gas for delivery to CIG Mainline Tuesday added 11 cents to $3.64 and deliveries to El Paso San Juan gained 10 cents to $3.69. On Northwest Pipeline Wyoming Tuesday packages were seen at $3.57, 4 cents higher, and at Opal gas was quoted at $3.63, 9 cents higher.
A futures broker said “there wasn’t anything too dynamic one way or the other. We were up a few times during the day and couldn’t hold it, nor did anyone say $3.80 is the bottom and lets pile in and start running it [higher] again. Even after the sell off on Thursday nobody has yet to say I want to buy $3.80,” said a Washington DC broker.
In the eyes of some, Thursday’s 17-cent plunge in the July contract wasn’t solely caused by the unexpected 111 Bcf inventory report. “Technical selling helped to exaggerate the break. Technical traders are going to be looking for a break to the $3.50 level,” said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm.
“It has been our feeling that spread trading (buying natural gas and selling the complex) could support the gas market while the positions were being established (We feel their is fundamental support for being long natural gas and short crude oil.) but will not be enough to give the natural gas market any significant upside above the low to mid $4 range. On a trade basis, we will hold our short natural gas positions,” he said in a weekend note to clients.
He advised trading accounts to hold on to a short July futures contract established when an earlier June short was rolled at $4.35. He suggested risking 25 cents on the trade.
End-users are advised to stand aside the market, and producers and those with risk for lower prices should continue to hold a short July-October strip established earlier at $3.75 to $3.95 and also a short November-March strip in place from $4.50 to $4.60, he said. The July-October strip is presently at $3.848, and November-March is at $4.107.
Seasonal traders see the market with room to work lower. “With the epicenter of the seasonal cycle bottoming window still two months away, we continue to favor a deeper retreat,” said Brian LaRose, a technical analyst with United ICAP. “However, we do not favor an average seasonal decline of 35% for this year [$2.87].” Based on Elliott Wave and retracement analysis he said that “intermediate candidates for support are ‘a’=’c’ targets $3.764, [and] 1.618 ‘a’=’c’ targets $3.464-3.425. A head and shoulders top targets $3.331-3.312. All are now within reach.”
Weather-wise, Commodity Weather Group in its six- to 10-day forecast shows average temperatures over the Atlantic Seaboard, Ohio Valley and Great Lakes. “Over the weekend, the models pulled away from prior expectations for a brief heat spike in the Midwest for this coming weekend and for the East Coast early next week,” said Matt Rogers, president of the firm.
“The pattern appears to be too transient, with ridging not strong enough to clear out a wet weather cycle from the East and dominate with hotter weather. Instead, we frequently watch the heat ridge focus on the South Central U.S. with some reach into the Southeast, interior West and sometimes up into the southern or western edges of the Midwest.”
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