Cash quotes overall averaged about 2 cents higher Monday as East and Northeast points were forecast to endure a slight warming but other areas of the country such as the Midcontinent saw nominal price changes. Futures markets seemed little fazed by the building Tropical Storm Isaac and at the close September had shed 4.9 cents to $2.653 and October had dropped 6.1 cents to $2.673. October crude oil fell 68 cents to $95.47/bbl.
East and Northeast prices generally firmed as above-normal temperatures were expected Tuesday. AccuWeather.com forecast that the Monday high in New York City of 79 would rise to 85 Tuesday before slipping to 80 on Wednesday. The normal high in New York this time of year is 81. Farther south Philadelphia’s high Monday of 87 was forecast to rise to 88 on Tuesday before slipping to 82 on Wednesday. The normal high for Philadelphia is 84.
“A high pressure area behind the front will usher drier air into the region [Tuesday] and Wednesday. Hotter air is getting ready to move out across the northern Plains and then will affect the Great Lakes and Northeast,” said AccuWeather.com meteorologist Eliot Abrams. “Chicago had 90-plus heat Thursday through Saturday, but the new round of hot air could be stronger and last longer.”
In the Northeast quotes on Algonquin gained 13 cents to $3.03 and deliveries to Iroquois Waddington were up a penny at an average $3.11. Gas into Tennessee Zone 6 200 L added 6 cents to $3.01. Farther south parcels delivered to Tetco M-3 were 8 cents higher at $2.92 and on Transco Zone 6 New York gas was quoted 7 cents higher at $2.92 also. Deliveries to Dominion slipped 2 cents to $2.71.
Next-day prices were mixed in the Midcontinent.
“No one is buying ahead of the storm. A lot of people don’t understand that much electric load went away,” said a Midcontinent producer. “Basically demand here is pretty lackluster, but it is going to get hot and we expect the market to pick up a little bit. The power burn is pretty minimal.”
Forecaster Wunderground.com predicted that the high in Oklahoma City Monday of 91 would rise to 95 by Tuesday and ease to 93 on Wednesday. The normal high in Okalhoma City at this time is 92.
Quotes on Panhandle Eastern added 2 cents to an average of $2.59 and deliveries to Oklahoma Gas Transmission were flat at $2.59. Gas into the NGPL Amarillo Line eased 2 cents to $2.76, but parcels into the NGPL Midcontinent Pool added a 5 cents to average $2.67.
Largest price declines on the day were noted at Florida Gas Transmission Zone 3 with a 8 cent drop to $2.95 as Tropical Storm Isaac was expected to unleash torrential load-dampening rains on much of Florida (see related story).
“Isaac is becoming more organized over the eastern Gulf of Mexico with an eye visible on radar,” said meteorologist Meghan Evans. “By later [Monday] or tonight, Isaac should strengthen into a Category 1 hurricane. Rain bands from Isaac continue to deluge southeastern to north-central Florida, resulting in localized flooding. The heaviest rainfall is soaking communities from north of West Palm Beach to Gainesville.”
The biggest gains in Monday’s trading at actively traded points were Algonquin Citygates and Tennessee’s Zone 4 Marcellus, up 14 cents to $2.62.
Futures traders were perplexed by the day’s losses.
“The storm bulls are getting their butts kicked,” said a New York floor trader. “We got down to $2.64 which is a 10-week low, and the next significant point is the 100 day moving average at $2.58. We thought that we might take a dive once we broke the 200-day average at $2.68, but it did hold $2.64.
“This storm doesn’t seem to be having an impact. You would think you would get some upside out of this thing. I would have thought the evacuations would have had a little play. Go figure.”
Evacuations for Isaac were in full swing. Based on data from offshore operator reports submitted to the Bureau of Safety and Environmental Enforcement (BSEE) by 11:30 a.m. CDT Sunday, personnel had been evacuated from a total of 39 production platforms, equivalent to 6.54% of the 596 manned platforms in the GOM. Personnel had been evacuated from eight rigs, equivalent to 10.5% of the 76 rigs currently operating in the Gulf.
NHC was also following a broad area of low pressure about 1,100 miles west-northwest of the Cape Verde Islands. NHC gave it a 30% (down from 40%) chance of reaching tropical cyclone status in the succeeding 48 hours. A third system, between the Cape Verde Islands and the west coast of Africa, was also under observation.
Analysts see the classic seasonality of natural gas prices as back in play and potentially offering a near-term buying opportunity. “The flood of shale gas that burst into this market did seriously disrupt the seasonal cycle. However, inventories look to have been brought under control,” said United ICAP Vice President Walter Zimmermann. “Seasonality may now reassert itself. The relevant seasonal rule of thumb from here is to avoid the short side of natgas between Labor Day and Thanksgiving.”
If Zimmermann’s calculations are correct, prices may be set for a precipitous short-term decline, perhaps this week, as traders head into the Labor Day holiday. “It really looks like natgas is headed for the $2.425 area. That would make for a textbook — ABCDE — down from the $3.277 [July 31] high and a 0.618 retracement of the $1.902 to $3.277 rally,” he said in a weekend note to clients.
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