Cash natural gas prices eased lower overall by a couple of pennies in featureless trading Monday. New England and eastern points were a couple of pennies higher, but Great Lakes locations were mixed, with changes within a couple of pennies of unchanged.
Futures traders generally expect a soft market going forward as weather is finally expected to moderate and storage additions turn stout. At the close of trading, June had eased 3.0 cents to $4.011 and July was off 2.9 cents to $4.064. June crude oil gained 55 cents to $96.16/bbl.
At Northeast locations, temperatures were forecast to inch moderately above normal, and next-day power prices provided little incentive to purchase gas for power generation. The National Weather Service (NWS) in southeast Massachusetts said that “large high pressure remains centered off the Maritimes and extended across New England. This will maintain the prolonged period of dry weather. While it will be cool at night…mild to warm days are expected…except along the immediate coast where cooling sea breezes will occur. Low pressure will approach from the south and bring some showers to the region Wednesday and Thursday.”
Forecaster AccuWeather.com predicted that the high Monday in Boston of 63 would rise to 70 on Tuesday but fall to 66 on Wednesday. The seasonal high in Boston is 63. At Hartford, CT, Monday’s high of 71 was expected to rise to 76 Tuesday and ease to 69 on Wednesday. The normal high in Hartford at this time of year is 68.
IntercontinentalExchange reported that next-day power slipped lower. At the New England Power Pool’s Massachusetts Hub, Tuesday real-time power fell $1.13 to $43.87/MWh, and at the PJM Western Hub, next-day real-time power deliveries for Tuesday fell 78 cents to $39.20/MWh. Deliveries to the New York Independent System Operator’s Zone G delivery point in eastern New York retreated 50 cents to $46.00/MWh.
Quotes at the Algonquin Citygates were down a penny at $4.24, and at Iroquois Waddington next-day deliveries came in at $4.45, also down a penny. On Tennessee Zone 6 200 L Tuesday packages were quoted at $4.22, up two cents.
At eastern points, temperatures were expected to hover just below normal. AccuWeather.com forecast that New York’s high of 65 Monday would rise to 67 on Tuesday and 64 Wednesday. The normal high in New York is 68. Philadelphia’s Monday high of 69 was expected to ease to 67 on Tuesday before reaching 69 on Wednesday. The seasonal high in Philadelphia is 71.
NWS for the week ended May 11 predicted well below normal heating requirements and no cooling loads in eastern and Midwest markets. It said New England would experience just 51 heating degree days (HDD), 30 fewer than normal, and no cooling degree days (CDD). New York, New Jersey and Pennsylvania were forecast to see 39 HDD, 25 fewer than normal, and no CDD. The greater Midwest from Ohio to Wisconsin was predicted to have35 HDD, 34 fewer than normal, and no CDD as well.
Next-day gas on Dominion added a nickel to $3.91, and deliveries on Tetco M-3 added 2 cents to $4.06. Gas bound for New York on Transco Zone 6 gained two pennies to $4.06 also.
In the Midwest, next-day gas hovered within a penny or two of unchanged as weather forecasts appeared benign. AccuWeather.com predicted that the high in Chicago Monday of 71 would hold for Tuesday before advancing to 73 on Wednesday. The normal high in the Windy City this time of year is 67. Des Moines, IA’s Monday high of 73 was anticipated to rise to 75 Tuesday and ease to 74 on Wednesday. The seasonal high in Des Moines is 69.
On Alliance next-day deliveries were quoted at $4.00, up about a cent, and at the Chicago Citygates, next-day gas came in at $4.00, down 2 cents. At Northern Natural Gas, Ventura gas for Tuesday was $3.91, a penny higher, and at Demarcation Tuesday parcels were seen at $3.90, off 1 cent.
Futures traders noticed an equally uneventful day. “The market traded most of the day between $4.00 and $4.03,” said a New York floor trader. “I thought we would come in and get a little bit of a selloff, and the market kind of held, but I think we’ll see $3.85 by Wednesday.”
Addison Armstrong of Tradition Energy sees near-term market drivers in the form of “traders eye[ing] the forecasts for mild temperatures and expectations of robust storage injections. Weather forecasts appear to provide little support for rising gas prices in the coming weeks, with normal to below-normal temperatures expected across Texas and the Southeast in the coming weeks, while the Midwest and Northeast are expected to see above-normal temperatures in the next five-days, followed by normal temps during the second half of this month.”
Mike DeVooght, president of DEVO Capital Management, a Colorado-based risk management firm, said, “We continue to hold our short positions for traders and producers.” Specifically, for trading accounts he recommends holding a short June futures contract at $4.35 and risking 25 cents on the trade. End-users should stand aside, and producers and physical market longs should hold short a July October strip at $3.75-3.95 and a November March strip at $4.50-4.60.
Tim Evans of Citi Futures Perspective suggested after Friday’s close that the more immediate reaction to Thursday’s and Friday’s price actions will be critical. “The near-term price action will depend in part on how many traders process [last] week’s result over the weekend. For example, we can imagine some possibility for short-term tactical buying looking for at least a partial recovery, a reversion toward a perceived mean. But our larger concern remains that 10-15 weeks of excess buying and the large degree of vulnerability that resulted will take more than a few days to correct. Prices may bounce in the near term, but we continue to see downside risk to $3.50 or even $3.25 over the next month or two.”
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