Physical natural gas prices on average rose 8 cents Monday led by strong gains posted by East and Northeast points, hefty screen gains, and buoyant next-day power prices. New England locations proved to be the biggest winners, but eastern points were not far behind. Gulf and California points firmed as well. At the close of futures trading July had advanced 14.2 cents to $3.875 and August rose 13.8 cents to $3.897. July crude oil slipped 8 cents to $97.77/bbl.
At eastern points next-day power prices provided a firm undertone for gains in next day gas. IntercontinentalExchange reported that next-day power into the New York Independent System Operator Zone A delivery point (western New York) rose $3.60 to $36.90/MWh and power into the PJM West Hub for Tuesday delivery rose $5.30 to $51.07/MWh.
Temperatures at major eastern cities were expected to spend the first part of the week above normal. Forecaster Wunderground.com said the high in New York City Monday of 86 was expected to ease to 81 Tuesday and 73 on Wednesday. The typical high in New York City this time of year is 80. Philadelphia’s 91 Monday high was predicted to fall to 88 Tuesday and 77 Wednesday. The normal high in the City of Brotherly Love is 79. Washington, DC’s 86 high on Monday was forecast to rise to 88 Tuesday and reach 82 Wednesday. The normal high in Washington is 85 at this time of year.
Wunderground.com meteorologist Kari Kiefer said to expect “Wet and unsettled weather for parts of the East and South on Monday as a cold front dropping southeastward across the Midwest reinforces another frontal boundary extending from the Northeast through the Central Plains. Expect rain and thunderstorm activity along and ahead the advancing cold front in parts of the Great Lakes into the Northeast.”
Gas delivered on Dominion added 11 cents to $3.63 and deliveries on Tetco M-3 rose a stout 15 cents to $3.86. Gas headed for New York City on Transco Zone 6 rose 25 cents to $3.89.
New England points were impacted by delivery constraints. Algonquin Gas Transmission reported that next-day gas was being restricted from points west of its Cromwell Compressor Station, and at its Beverly meter station no increases in deliveries were being accepted.
Next day deliveries at the Algonquin Citygates rose 24 cents to $3.97 and gas into Iroquois Waddington gained 11 cents to $4.14. Deliveries on Tennessee Zone 6 200 L were up by 22 cents to $4.03.
Gulf points also posted solid gains. Transco Zone 3 deliveries Tuesday gained 6 cents to $3.78 and at the Henry Hub next-day gas was also quoted at $3.78, up 2 cents. Packages on Tennessee 500 L were up by 7 cents to $3.81 and gas on Columbia Gulf Mainline rose by 8 cents to $3.77.
On the West Coast some points were up by double digits. Parcels Tuesday at the PG&E Citygates rose by 7 cents to $3.89 and deliveries to the SoCal Citygates were higher by 10 cents to $4.01. At the SoCal Border gas was seen at $3.78, about 6 cents higher and on El Paso S Mainline gas changed hands at $3.89, 14 cents higher.
“We had a little stall on the downside, so I think you saw some profit-taking by near term shorts,” said a New York floor trader. “There was also an incentive for longer term longs to push it higher. I think it is possible to move back to the $4 area, but it may struggle in the low $3.90s again. Against $4 it’s a weak hold.”
“We are probably in a range and trade as high as $4 and down to where this dip was earlier [$3.71]. It’s just waiting and watching the weather, but not much else has changed that we can see.”
Tropical developments rattled their way through the market. At 5 p.m. EDT the National Hurricane Center reported it was watching Tropical Depression 2, located off the coast of Belize and moving to the west northwest at 12 mph. Maximum sustained winds were 35 mph and NHC projections had the storm moving west across the Yucatan Peninsula into the Bay of Campeche. No indication was given whether the storm may strengthen once it crosses the Yucatan.
Longer term weather forecasts turned warmer since last week. MDA Weather Services in its morning six- to 10-day outlook showed above-normal temperatures over the entire country with the exception of an area south and east of a line from North Carolina to Alabama. That region is expected to be below normal. “This period has turned hotter since late last week to include more widespread aboves from the Midwest to Northeast. This includes a day or two surge of much aboves into parts of the Midwest early, with Chicago and Cincinnati likely to near 90 degrees.
The pattern otherwise looks similar to expectations, with a seasonal to cool outlook for the Southeast and a gradual expansion and intensification of aboves in the West. Models agree on the general pattern evolution, helping to raise confidence slightly into the moderate to high range.”
Mike DeVooght of DEVO Capital Management sees the market working lower based on continued large storage injections. “[N]atural gas is still poised to continue this negative trend. We still feel that technical traders are going to be looking for a break to the $3.50 level, which is not too far away. On a trade basis, we will hold our short natural gas positions,” he said in a weekend note to clients.
DeVooght is currently advising trading accounts to hold on to a short July position rolled over from a short June when June was at $4.35 and risk 25 cents on the trade. End-users are counseled to stand aside, and those with exposure to lower prices should hold a short July October strip at $3.75-3.95 and also a short November-March strip at $4.50-4.60.
Tom Saal, vice president at INTL FC Stone in Miami in his work with Market Profile is expecting the market to test last week’s value area at $3.806 to $3.730. From there he anticipates that the market will “eventually” test subsequent value areas at $4.040 to $3.920 and $4.258 to $4.046.
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