Physical gas prices overall averaged four cents higher Monday with most points reporting nominal temperature-driven gains. Eastern points averaged gains of about a nickel, and Midwest locations gained close to a nickel as well, as chilly and stormy conditions were expected to prevail nearterm.
Natural gas futures tumbled somewhat following free-falling oil, equity and precious metals markets. At the close May natural gas had fallen 8.5 cents to $4.137 and June was down 9.3 cents to $4.168. May crude oil continued its string of dollar-plus losses, dropping $2.58 to $88.71/bbl.
Northeast price increases were kept in check as temperatures were expected to be above seasonal norms for the next couple of days. “New England prices are pretty low, about $5m give or take a dime or so,” said a Northeast marketer. Conditions are expected to be mild, and “I don’t look for any great changes in prices. In the absence of higher demand, gas in New England has to be about 25 cents higher than Tetco M-3.”
Wunderground.com predicted Monday’s high in Boston of 54 would rise to 59 Tuesday and 63 Wednesday. The normal high in Boston is 55 at this time of year. Hartford, CT’s Monday high of 64 was expected to hold Tuesday and rise to a balmy 70 on Wednesday. The normal high in Hartford is 60.
Quotes on Algonquin Citygates were down a cent for Tuesday deliveries at $4.96m and gas on Iroquois Waddington gained 3 cents to $5.02. On Tennessee Zone 6 200 L next day deliveries added 6 cents to $4.87.
Spring snow and cold temperatures kept a bid under the market for Midwest points. “Snow showers will continue across the North-Central U.S. on Monday as the strong storm system impacting the region lifts northeastward across Lake Superior and into southern Ontario, Canada,” said Wunderground.com meteorologist Kari Kiefer.
Wundergroud.com predicted the high in Chicago Monday of 66 would fall to 45 on Tuesday but rise to 54 on Wednesday. The normal high in Chicago is 59. Milwaukee, WI’s Monday high of 57 was anticipated to sink to 48 Tuesday and drop to 45 on Wednesday. The normal high in Milwaukee this time of year is 54.
Deliveries Tuesday on Alliance Pipeline gained 4 cents to $4.30, and at the Chicago Citygates gas came in at $4.29, up 3 cents. On Northern Natural Gas Ventura, gas for delivery Tuesday added 4 cents to $4.24. Other market centers were firm as well. Packages at the Henry Hub gained 2 cents to $4.23, and deliveries to El Paso Permian were higher by 4 cents to $4.08, and at Opal Tuesday parcels rose 4 cents to $4.06. At the PG&E Citygates, gas was seen at $4.27, up about 3 cents.
Traders saw the market as a correction but not with any of the severity of other markets. The Dow Jones Industrial Average dropped 266 points to 14,599, and gold spiraled lower by $155 to $1,346/oz.
“Today was a little bit of an adjustment, but we did trade as high as $4.29 overnight,” said a New York floor trader. He added that Monday’s trading set up support at $4.12, “then below that $4.10 and $4. You are going to see corrections like… We have been rallying the last couple of weeks, plus you have the crude off $2.50 and the products down $4.5 cents so that is keeping the market quiet.”
Analysts see establishing a long position in natural gas intricately linked to the petroleum complex. “It seems that natural gas is one of only a few commodities that are moving higher…It has been our feeling that natural gas is in the process of putting in a major bottom, but we feel the process is going to take quite some time,” said DEVO Capital President Mike DeVooght.
“We do think that the trade, buy natural gas and sell the complex, has a considerable amount of fundamental merit. If we continue to see manufacturing demand pickup, while countries abroad continue to weaken, you could make a case that natural gas will increase in value relative to the U.S. oil markets. This might support the natural gas markets while the positions are being established (open interest in the natural gas market has exploded over the past five to six weeks), but ultimately there is more than adequate supplies to meet any uptick in natural gas demand.
“Ultimately, the long natural gas/short oil trade could work, but it could work because all of the energy markets go lower, but natural gas doesn’t fall as much as the oils. If the winter strip should approach $5 [currently $4.53], we will start to establish a light short position.”
WSI Corp. in its Monday six- to 10-day outlook said, “Temperatures are warmer over the western and central U.S. but colder over the Deep South and East when compared to Friday’s forecast.”
The National Weather Service for the week ending April 20 is looking for well below normal heating loads. New England is expected to see 91 heating degree days (HDD), or 42 fewer than normal, and New York, Pennsylvania and New Jersey are looking at 76 HDD, or 36 fewer than normal. The Midwest from Ohio to Wisconsin is expected to see 93 HDD or 22 fewer than normal.
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile was looking for the market to test last week’s value area at $4.17-4.053. Eventually, he expects a test of $3.619-3.519.
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