The physical natural gas market added an average of 4 cents Monday for Tuesday delivery, led by surging prices at Northeast points prompted by warm temperatures and big jumps in next day power. Eastern points also tallied double digit gains, far outdistancing trading centers in the Midwest and Gulf as well as those in California and the Rockies. At the close of futures trading July had fallen 3.2 cents to $3.739 and August was off 3.3 cents to $3.760. August crude oil recovered $1.49 to $95.18/bbl.
“Our power customers are buying left and right,” said a Northeast marketer. “Boston is supposed to be in the 90s tomorrow. That’s a little toasty.”
He added that gas prices were largely dependent on power prices and another $5 to $10 increase in LMP (locational marginal prices) would easily be reflected in next-day gas prices.
IntercontinentalExchange reported that power for delivery Tuesday at the New England Power Pool’s Massachusetts Hub rose a stout $14.30 to $79.46/MWh and real time power delivered to the PJM West terminal gained $9.47 to $76.23/MWh.
AccuWeather.com reported a warm start to the week in the East. Monday’s high of 94 in Boston was set to ease to 93 Tuesday and 89 Wednesday. The normal high in Boston this time of year is 78. Hartford, CT’s 94 degree Monday high was expected to drop to 92 Tuesday and 91 on Wednesday. The normal high in Hartford is 82.
“Blazing sunshine and hot, humid conditions in the East now will yield to even more humid weather by late-week with more numerous showers and thunderstorms,” said AccuWeather.com meteorologist Alex Sosnowski.
“Temperatures will continue to peak well into the 80s to lower 90s through midweek over the Appalachians and the I-95 corridor. [Heat Index] temperatures will top 100 degrees for several hours in many areas away from the Atlantic beaches, he said.
Quotes at the Algonquin Citygates jumped $1.05 to $5.48 and deliveries to Iroquois Waddington added 51 cents to $4.72. Gas bound for Tennessee Zone 6 200 L rose 99 cents to $5.37.
Eastern points were also firm. Gas on Dominion rose 19 cents to $3.70 and deliveries on Tetco M-3 added 15 cents to $4.01. Gas bound for New York City on Transco Zone 6 gained about 37 cents to $4.27.
Midwest market centers were mostly lower. At the Chicago Citygates next-day gas was quoted at $3.88, up a cent, and at NGPL’s Midcontinent Hub gas for Tuesday came in at $3.69, down a nickel. The Henry Hub was quoted at $3.81, 4 cents lower.
In the West prices inched higher. Deliveries to PG&E Citygates were unchanged at $3.85 and packages into Opal gained 2 cents to $3.58. Deliveries to El Paso non-Bondad added 2 cents to $3.60.
Futures traders see a warm start to summer and suggest that could support prices at current levels. “We had hot weather Sunday, but the humidity went up in a really big way,” said Steve Blair of Rafferty Technical Group in New York. “It’s supposed to be that way for the next couple of days, and that is not the norm for this part of the country at the end of June. Historically we don’t get the high humidity until mid July or August. I think the market is very comfortable where it is.”
Looking further out weather forecasts aren’t giving traders much to hang their hats on, according to one trader. “After sliding to within a couple pennies of this month’s earlier three-month low at $3.71 [in overnight trading], gas prices have since rebounded back to the upside amidst light short-covering as this month’s bid week trading begins,” said Addison Armstrong of Tradition Energy. He added that “Weather forecasts, after the next couple days of above-normal temperatures across the Midwest and Northeast, are cooler for the first half of July. Forecasts for Texas and the Southeast are little-changed, with normal to below-normal temperatures expected in the coming weeks.”
Commodity Weather Group in its morning 11- to 15 day forecast shows only normal temperatures for populous eastern and Midwest markets. Above normal temperatures are confined to California and the western one-third of the country. “The main heat focus for the Midwest and East is this week with upper 80s and low-mid 90s in most cases along with moderate humidity levels. While this week is the hottest week of the summer so far, the pattern is still not achieving levels reached at this point last year,” said Matt Rogers, president of the firm.
“The heat retreats to the West in the 6-15 day range (which pushed forward mostly on schedule over the weekend). It does hit Texas on its way west and our forecast favors some low 100s in Dallas this weekend with mid-upper 90s risks for other locations. California starts seeing hotter heat next week with mid-upper 90s for Burbank and Sacramento. While the Midwest leans cooler today for the 6-15 range, we see hints of lingering humidity on the E. Coast that could marginally hold [energy] demand higher, especially on the lows.”
Tom Saal, vice president at INTL FC Stone in Miami in his work with the weekly Market Profile expects the market to test last week’s value area at $3.926 to $3.816 before moving on and “eventually” test $4.258 to $4.046.
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