Physical natural gas prices on average gained a penny Tuesday with traders seeing no immediate need to make purchases during a holiday-muted trading week. Upper Midwest points added a couple of cents, and West Coast citygate prices were lower as forecasts of power demand were tempered. At the close, August futures were up 7.7 cents to $3.654 and September had added 7.8 cents to $3.651. August crude oil rose $1.61 to $99.60/bbl.
Marketers in the Great Lakes said it was early in the month and demand from customers hadn’t been fully determined. “We can only go by the last couple of years’ experience, but we bought today since prices are still in a good range,” said a Michigan marketer. “We bought on both Consumers and Michcon and paid $3.77 on each, and for July baseload we went with our normal volumes.”
Forecasters said to expect little change in the nation’s weather on Tuesday as a fairly stagnant weather pattern remained overhead. “This pattern will support continued heat in the West and another round of showers and storms in the East,” said Wunderground.com meteorologist Kari Kiefer. “In the East, hot and humid weather conditions will continue for the eastern third of the nation as the region remains in between an upper trough of low pressure over the eastern valleys and a ridge of high pressure in the western Atlantic Ocean. Ample warm, moist flow will stream in from the south-southwest and pool along a cold front stalling from the Northeast through the Ohio Valley, leading to more showers and storms through the day.”
Temperatures throughout the region were expected to remain temperate. Detroit’s Tuesday high of 77 was forecast to rise to 82 Wednesday and ease to 79 by Thursday. The normal high in Detroit at this time of year is 82, according to Wunderground.com. Chicago’s Tuesday high of 70 was seen holding Wednesday before rising to 77 Thursday. The normal high in Chicago is 84. Milwaukee’s 72 high Tuesday was expected to remain in place Wednesday before rising to 75 on Thursday. The seasonal high in Milwaukee is 80.
Gas for Wednesday delivery on Alliance came in at $3.61, up 2 cents, and gas at the Chicago Citygates rose 3 cents to $3.62. On Michcon, next-day gas was quoted at $3.76, up 4 cents, and on Consumers gas for Wednesday rose 2 cents to $3.77. On Dawn, Wednesday packages changed hands at $3.99, up 3 cents.
On the West Coast gas for delivery at citygate points fell as forecasts for power usage were tempered. Other points, however, rose.
The California Independent System Operator (CAISO) forecast that Tuesday’s peak power demand would reach 46,362 MW, but on Monday CAISO predicted Tuesday’s peak at 47,476 MW. Wednesday’s peak demand was expected to reach 46,334 MW. Tuesday’s and Wednesday’s peak power requirements are formidable. Both are right at the peak loads seen for all of 2012 at 46,846 MW reached Aug. 31.
Next-day power prices at points in and around California tumbled. According to IntercontinentalExchange, peak power for delivery Wednesday to COB fell $72.18 to $66.50/MWh, and at Mid-Columbia, next day packages fell $65.38 to $54.65/MWh. Power at Palo Verde in Arizona skidded $56.41 to $63.40/MWh.
California power prices also retreated. At NP-15, peak power Wednesday dropped $36.55 to $72.10/MWh, and peak deliveries to SP-15 fell $40.13 to $64.87/MWh.
At Malin next-day gas fell 2 cents to $3.43, and at PG&E Citygates, Wednesday gas was quoted at $3.82, down 10 cents. At the SoCal Citygates, parcels for Wednesday dropped 3 cents to $3.94. At the SoCal Border, however, gas was seen at $3.91, up 7 cents, and on El Paso S Mainline Wednesday gas came in at $3.99, up 9 cents.
Analysts see some indication of warmer temperatures on the horizon. “[There is] increasing evidence of hot temperatures that are beginning to stretch across a broader portion of the eastern one-third of the nation,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients. “Although temperature moderation across much of the Midcontinent is providing some offset, the fact that the warmer temps within the northeast are stretching into the third week of July is tending to accentuate price gains.
“The usual positioning ahead of the weekly EIA storage data is also likely at work in forcing some short covering this morning given the likelihood that the storage injection will be much closer to normal increase than has recently been the case. But while our expected build of 73 Bcf is only a couple of Bcf above the five-year average, the dynamic of year over year deficit contraction will remain alive and well given last year’s small hike of only 41 Bcf. As a matter of fact, comparisons against last year will remain difficult given that injections in 2012 averaged only about 30 Bcf within the upcoming eight-week period. In other words, additional significant year over year deficit contraction will be a dynamic that will tend to contain sizable price advances going forward.”
Estimates of Wednesday’s noon EDT release of Energy Information Administration inventory data are closely bunched. IAF Advisors expects a build of 75 Bcf and Ritterbusch and Associates calculates a 73 Bcf increase. A Reuters survey of 18 traders and analysts revealed a sample mean of 71 Bcf with a range of 51-80 Bcf. Last year, 41 Bcf was injected, and the five-year average stands at 71 Bcf.
WSI Corp. in its Tuesday morning six- to 10-day outlook said, “[Tuesday’s] forecast is cooler over the north-central U.S. and warmer over the northwest when compared to the previous forecast. Forecast confidence is near to slightly above average as a result of good agreement between the latest medium-range model guidance solutions. Temperatures could run a few degrees warmer over the northwest as a warm ridge builds over southwestern Canada.”
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile expected the market to test Monday’s value area at $3.560 to $3.592. He was not specific in his timing, but typically prior day’s value areas are reached the next day. He also said the market could trade into “space” left on the Market Profile in previous sessions between $3.679 and $3.612.
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