Physical natural gas prices on Friday played catch-up with Thursday’s futures collapse, and weekend and Monday gas at all but a handful of points scored double-digit losses averaging 16 cents.
The losses were pervasive and widespread. Northeast, East and major trading hubs all shed 11-19 cents. At the close of futures trading, July had added 0.1 cent to $3.828 and August was higher by 0.5 cent to $3.848. July crude oil rose $1.27 to $96.03/bbl.
Tennessee Gas Pipeline declared a force majeure as “equipment and contractors are being mobilized to take Station 409 B (South Texas) offline Tuesday for repairs due to excessive compressor packing blow-by. The expected duration of the outage is two days and may result in potential restrictions through a pro-rata portion of nominations,” the company said on its website Friday.
“We typically don’t pay attention to the 400s because it doesn’t impact us,” said a Houston-based marketer who deals primarily with the Northeast and Eastern markets. “That station is far South Texas, close to the border, and all the gas in that region is going into Mexico. The flows have pretty well turned around in that area. If that is going to affect anything, it will most likely affect Mexico.”
Weekend and Monday gas at South Texas locations fell in concert with the market as a whole. Quotes at NGPL S TX fell 17 cents to $3.67, and deliveries to Tennessee Zone 0 shed a dime to $3.71. On Texas Eastern S TX, quotes for weekend and Monday delivery fell 14 cents to $3.72, and gas on Transco Zone 1 was seen 6 cents lower at $3.74.
Quotes for gas delivered on northeast pipelines fell hard, although temperatures in the region were expected to rise over the weekend and be well above normal by Monday. Forecaster Wunderground.com predicted that the high Friday in Boston of 63 would rise to 72 on Saturday and 81 on Monday. The normal high in Boston this time of year is 73. Hartford, CT’s 66 high Friday was anticipated to jump to 79 on Saturday and 84 Monday. Hartford’s normal high is 77.
Gas slated for delivery over the weekend and Monday on Algonquin slumped 14 cents to $3.81, and at Iroquois Waddington, weekend and Monday gas came in at $3.86, down 23 cents. On Tennessee Zone 6 200 L, weekend and Monday packages were seen off 8 cents to $3.79.
The National Weather Service in southeast Massachusetts forecast that there would be “heavy rain continuing into Saturday morning associated with the remnants of post-tropical Andrea. Showers and thunderstorms will be possible Saturday afternoon in wake of Andrea…thereafter becoming dry and seasonable into Sunday. Showers and thunderstorms return for early [this] week. Weak high pressure ushers in another brief period of dry weather.”
Gas delivered to eastern points suffered double-digit declines, too as temperatures were expected to fluctuate around seasonal norms. Wunderground.com forecast that Friday’s high in New York of 70 would rise to 82 Saturday but slip to 75 Monday. The seasonal norm for New York is 77.
On Dominion, weekend and Monday gas fell 18 cents to $3.51, and gas at Tetco M-3 shed 20 cents to $3.66. Gas headed for New York City on Transco Zone 6 fell 14 cents to $3.68.
Other market centers were weak as well. At the Chicago Citygates, gas was seen at $3.75, down 19 cents, and quotes at the Henry Hub fell 14 cents to $3.79. Weekend and Monday packages at El Paso Permian dropped 18 cents to $3.58, and gas at Opal was quoted 16 cents lower at $3.54.
Futures traders look for the market to work lower next week. “We’re headed lower from here. I think we are going to $3.65,” said a New York floor trader. “The [injection] number Thursday was pretty convincing, and I don’t think the market will hold up. I look for the market to come in lower on Monday and work lower next week.”
Analysts saw Thursday’s overwhelming reported storage increase as not fully digested by the market.
“[Thursday’s] 111 Bcf storage increase provided one of the larger data surprises of the past couple of years as the upswing deviated from average expectations by about 15 Bcf while exceeding the year-ago build by almost 50 Bcf. The implied sharp reduction in the storage deficit is a major dynamic force that has yet to be fully discounted, in our opinion,” said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients.
“Updates to the short-term temperature views that have been forthcoming since the beginning of last week have been consistent in anticipating mild temperature trends across key consuming regions such as the Midcontinent and northeast areas of the country. While some above-normal trends are expected across the state of Texas, this is providing only a partial offset to mild patterns elsewhere. As a result, some comparatively strong storage injections through the remaining Thursdays of this month need to be factored into the pricing equation.”
Market forecasters will now have to adjust to a changed supply dynamic, in Ritterbusch’s opinion. “The much larger than expected supply hike provided further testament to non-weather-related developments that continue to include a much stronger than previously expected production pace as well as some assertive switching away from high-priced gas and toward low-priced coal. Both of these supply and demand forces were set into motion by a $4 price handle that persisted through most of the spring period. Reversing these trends will not be a simple process, especially with prices still within easy reach of the pivotal $4 mark.”
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