Natural gas cash prices overall added just a half-cent Wednesday as temperatures were forecast to take a dive over the next several days. Midwest and Great Lakes points were higher by a couple of pennies, but Northeast and eastern locations eased. At the close of trading, June futures had fallen 0.6 cent to $4.186 and July was off 0.6 cent as well to $4.233. July crude oil tumbled $1.90 to $94.28/bbl.

Great Lakes marketers were bracing for a cool spell. “It’s not going to get out of the 50s Thursday, but for June we are just going to go off the last couple of years to see how much gas we buy at index,” a Michigan marketer said. “We didn’t buy for [Thursday], but the price is pretty darn strong. Even though Trunkline came back up, it appears there are some issues on pipelines.

“There are some things happening that are contributing to the higher price on ANR and Trunkline, so all that gas we baseloaded at index is looking good. Index price is less than today’s price. We heard prices got up to $4.50 [Michcon and Consumers] and that is lower than what we paid for index even with our elevated basis.”

Temperatures were forecast to drop below normal throughout the region. Wunderground.com said Wednesday’s high of 84 in Chicago would drop to 55 Thursday before climbing back up to 64 on Friday. The seasonal high in Chicago is 72. Detroit’s high of 84 Wednesday was expected to fall to 66 Thursday and 63 on Friday. The normal high in Detroit is 72. Milwaukee’s high on Wednesday of 70 was anticipated to fall to 52 Thursday and move to 61 on Friday; the seasonal high is 67.

The National Weather Service in Chicago said Wednesday’s weather into Thursday morning “look like the last of the active weather through at least late this week as a blocking pattern sets up aloft. Below normal temperatures are expected tomorrow as the upper level trough passes overhead…but temperatures return to near normal for Memorial Day.”

Quotes for Thursday delivery on Michcon added 2 cents to $4.45, and deliveries to Consumers were up a cent at $4.49. At the Chicago Citygatesm next-day deliveries were seen at $4.26, 3 cents higher, and Alliance gas changed hands at $4.23, 2 cents higher. Dawn gas averaged $4.53, up a penny.

Eastern and Northeast points were flat to lower. Deliveries to the Algonquin Citygates were unchanged at $4.65, and gas into Iroquois Waddington fell 2 cents to $4.64. On Tennessee Zone 6 200 L, next-day gas was down a cent at $4.83. Tetco M-3 was quoted at $4.28, down 5 cents, and Dominion parcels for Thursday delivery added 2 cents to $4.22. Gas bound for New York City on Transco Zone 6 fell 13 cents to $4.32.

Futures traders reported light, uninspired trading. “We only traded 84,000 in the June contract and the range is only 7 cents, which is nothing,” said a New York floor trader. Based on Wednesday action, “resistance would be at $4.23 and support $4.15. Above that $4.30 on the upside and $4.10 down below.”

Those levels could easily be tested when the Energy Information Administration releases weekly storage figures Thursday morning. Last year 56 Bcf was injected and the five-year average stands at 83 Bcf. IAF Advisors calculates a 92 Bcf build, and a Reuters poll of 21 traders and analysts revealed an average 91 Bcf. Bentek Energy anticipates an 89 Bcf increase.

The warm temperatures, power load/gas demand dynamic is expected to hit its stride soon if near-term weather forecasts prove correct. Commodity Weather Group (CWG) in its 11- to 15-day outlook shows an elongated east-west ridge of above-normal temperatures extending from New Jersey to Colorado, and from southern Wisconsin to Arkansas.

“The start of meteorological summer is next Saturday, and the latest dynamic models show building consensus that we will be engaging in another widespread heat event from the Plains to the Midwest and East Coast. The Deep South should also partake in the heat, but there are still signs of cooler risks below the main core ridge, especially along the Gulf Coast,” said CWG President Matt Rogers. “Given the calendar and coverage offered by the pattern type, this should be the strongest heat event so far this season with potential for more 90s into parts of especially the southern Midwest to lower Mid-Atlantic, but potentially farther north as well. By late in the 11-15 day, trends continue to build new heat ridging toward the western U.S., which allow the eastern heat ridge to deteriorate and set up a possible cooler second week of June.”

All indications are that there will be gas available to meet the weather-driven demand. Sandy Fielden in a blog post for RBN Energy described how production from the Marcellus Shale has been under-forecast for the last two years. “Production forecasts for natural gas in the Appalachian Marcellus Shale have doubled from 7 Bcf/d to 14 Bcf/d in less than two years. As a result, Northeast demand for natural gas will be almost entirely met from local production in coming years. Significant replumbing of the U.S. natural gas pipeline distribution system will be needed and in many cases has already commenced.”

This will have major repercussions for gas flows. “Over the next few years, these flows will be flipped backwards because Northeast production will cover regional demand and force traditional suppliers to find other markets for their gas. First to go will be Canada. Then flows from the West will flip, and yes — that does mean that the Rockies Express Pipeline (REX) will likely be moving gas from the east to the west. Flows from the Southeast Gulf region will not reverse, but they will almost disappear during the summer months when demand in the Northeast is lowest…which means that pipelines like the big three ‘T’ pipes — Transco, Tennessee and Texas Eastern — will no longer be needed to supply the Northeast for most of the year.”

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