Natural gas cash market quotes were on average nearly 5 cents lower Tuesday for Wednesday delivery as near-term weather patterns showed moderation in key eastern energy-consuming regions. Northeast locations led the trend lower, but major market centers nationally were lower as well. At the close of trading, July futures had fallen 7.6 cents to $3.724, and August was off 7.8 cents to $3.743. July crude oil declined 39 cents to $95.38/bbl.
A Northeast marketer said traders were looking for lower prices in the region. “A trader thought Transco Zone 6 New York would fall tomorrow. He didn’t want to pay more than $3.93 Tuesday for Wednesday. He’ll just buy intraday [Tuesday] because he thinks the next day will be off.”
Eastern traders found themselves buying into a forecast downward trend in temperatures. Wunderground.com predicted that Tuesday’s high in Boston of 73 would fall to 68 Wednesday and 66 Thursday. The seasonal high in Boston is 75. New York City was expected to see its Tuesday high of 86 slide to 79 Wednesday and 72 Thursday. The normal high in New York is 78. Philadelphia’s 84 high on Tuesday was anticipated to drop to 82 Wednesday before falling further to 73 Thursday. The normal high this time of year in Philadelphia is 77.
Meteorologists see the cooler temperatures as reflecting unstable conditions. “Unsettled weather persists for the Eastern Seaboard on Tuesday as an upper-level trough of low pressure continues on an eastward track across the Mid-Atlantic,” said Kari Kiefer, Wunderground.com meteorologist. “Expect weaker rain and storms than Monday’s weather activity as the energetic cold front associated with this system exits the East Coast and moves into the western Atlantic. Generally scattered showers and isolated thunderstorms will remain possible from parts of the Southeast through the Mid-Atlantic. Meanwhile, the northern portion of this system will maintain chances of heavy rain and thunderstorms across the Northeast, as well as scattered showers and thunderstorms in parts of the Great Lakes as it lifts northeastward and moves offshore through the mid-week.”
Gas for delivery Wednesday to Algonquin Citygates fell 13 cents to $4.16, and packages bound for Iroquois Waddington shed 15 cents to $4.10. Gas on Tennessee Zone 6 200 L was seen 16 cents lower at $4.17.
To the south, Dominion deliveries were flat at $3.67, and gas on Tetco M-3 shed 3 cents to $3.86. Gas into New York City on Transco Zone 6 was flat at $3.94.
Next-day power prices in the Mid-Atlantic were mixed. IntercontinentalExchange reported that peak next-day power at the PJM West trading point rose $6.15 to $53.39/MWh, and power into the New York Independent System Operator’s Zone G market point (eastern New York) fell $4.33 to $46.32/MWh.
Other market hubs weakened as well. Chicago Citygates came in at $3.81, 6 cents lower, and deliveries to the Henry Hub weakened 8 cents to $3.77. Gas at El Paso Permian finished 8 cents lower on the day at $3.61, and gas at the SoCal Citygates shed a dime to $3.91.
Futures traders saw the market setting new support levels. “[Tuesday’s] settlement is now support, but below that $3.65 will be the next level,” said a New York floor trader.
Jim Ritterbusch of Ritterbusch and Associates sees the market marking time. “The market is slipping lower this morning, and today’s lowest July futures price since mid-March is sending off some bearish technical vibes. Nonetheless, we are still anticipating support at around the $3.78 area with some gravitation at around this level into tomorrow. Existing speculative shorts will be looking for even minor reasons to cover positions ahead of another storage release on Thursday,” he said in a [Tuesday] morning report to clients.
“Although this week’s storage figure will be quite strong again given last week’s relative cool temps and elevated output and gas-to-coal switching trends, we feel that a triple-digit hike may have already been discounted. Consequently, the market will need only a modicum of bullish guidance from the temperature factor to post a meaningful price advance. For now, the short-term one-two week outlook that stretches into the last week of June appears about price-neutral. While some above-normal temps are spreading northerly into the Midwest, this supportive item is being offset by continued cool expectations within the heavily populated northeast region. Should the below-normal trends get pushed out of the northeast, we would look for the weather factor to acquire a more bullish appearance.”
Addison Armstrong of Tradition Energy sees the market focusing on another outsized injection “as traders shrug off forecasts for hot weather in Texas and the central U.S. in the coming week and instead focus on expectations for what will likely be a sixth-consecutive above-average storage injection.
“Prices have now erased more than half of the 40% rally of the last four months as fears of a tightened supply outlook have been replaced by mild temperatures, above-average storage injections and the end of the nuclear power plant maintenance and refueling season. Weather forecasts are little changed from [Monday], with Texas and the Southeast expected to see mostly above-normal temperatures in the coming week, while the Midwest and Northeast are expected to see normal to below-normal temperatures.”
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