Cash natural gas prices fell 6 cents Monday, led by multi-dollar declines at Northeast points. East points were soft as well, and California locations were mixed. At the close of futures trading, July had added 0.7 cent to $3.991 and August was higher by 0.6 cent to $4.009. July crude oil added $1.48 to $93.45/bbl.

The differential between PG&E Citygate and SoCal Citygate continues to widen with SoCal Citygate at a stout premium to PG&E Citygate, a significant change from just a couple of months ago when both were trading in the $4.20s. “With gas demand for eastern points being met by mostly local production, such as the Marcellus, you are getting gas pushed back to the [Henry] Hub,” said a trader with a Southern California power generator.

“At the same time it is also getting pushed back to the Rocky Mountains, and that will impact PG&E Citygate. SONGS [San Onofre Nuclear Generating Stations] is also a bullish play relative to PG&E, but the Marcellus is pushing gas back to the other points. That will impact PG&E more than SoCal, as will SONGS impact SoCal.

“We have also had a spike in warm temperatures out here too.” Across the West it’s a little hotter, but when you look at absolute temperatures, it’s also a bigger deal in Southern California.”

According to meteorologists, temperatures in the desert Southwest are expected to soar. “To start off the week in the Southwest, temperatures will be heating up well above average,” said meteorologist, Courtney Spamer. “With a lack of storm systems moving into the area, sunshine will continue to prevail across the region for the beginning of June [and] with the jet stream remaining to the north, dry heat will continue to filter into the area on Monday.

“Las Vegas looks to surpass 100 degrees on Monday. Other than just getting over 100 in the middle of May for two consecutive days, this will be the warmest it has been since the beginning of last September. Temperatures on Monday are expected to reach almost 10 degrees above the average of 95 for this time of year. On Tuesday and Wednesday, temperatures will hover near 100 degrees during the afternoon.”

“Phoenix, AZ, will also have some abnormal warm temperatures for the next few days. Temperatures on Monday will also be close to 10 degrees above average and approaching the record of 112 degrees last set back in 1965. Hot sunshine will continue throughout the remainder of the week with temperatures at least a few degrees above the 100-degree mark.”

Quotes for Tuesday gas into Malin fell 5 cents to $3.86, and deliveries to the PG&E Citygates fell 6 cents to $4.11. SoCal Citygates were seen 4 cents higher at $4.24, and deliveries to the SoCal Border came in at $3.99, flat. Deliveries to El Paso S Mainline gained a nickel to $4.12.

Weak next-day power prices at eastern locations kept next-day gas prices on the defensive. IntercontinentalExchange reported that real-time power for Tuesday delivery to the New England Power Pool’s Massachusetts Hub fell $19.17 to $43.25/MWh, and power into PJM West for Tuesday fell $11.03 to $37.47/MWh.

Deliveries to the Algonquin Citygates plunged $2.00 to $4.67, and on Tennessee Zone 6 200 L next day gas fell 97 cents to $4.33. At Iroquois Waddington next-day deliveries changed hands at $4.40, 27 cents lower.

Other eastern points softened as well. Gas on Dominion shed 9 cents to $3.79, and deliveries to Tetco M-3 fell 5 cents to $4.02. Gas bound for New York City on Transco Zone 6 was seen 13 cents lower at $4.04.

Futures traders noted a quiet day with July futures momentarily breaking above $4, but at the close unable to finish the job. “I thing the bulls have done an admirable job of propping the market above $4 [until now], but without any fundamental help it will be difficult,” said a New York floor trader.

Analysts are taking a broad, macro approach to natural gas pricing and see limited upside given weakness in crude oil and commodities overall. “This past week the gas market seemed to trade in tandem with commodities in general and the equity markets: choppy, sideways but with a downward bias,” said Mike DeVooght, president of DEVO Capital Management, a Colorado-based trading and risk management firm. “It has been our feeling that spread trading (buying natural gas and selling the complex) could support the gas market while the positions were being established (we feel there is fundamental support for being long natural gas and short crude oil) but will not be enough to give the natural gas market any significant upside above the low to mid $4 range.”

Currently for trading accounts DeVooght has rolled a short June position to short July, risking 25 cents on the trade. End-users are counseled to stand aside, and those with exposure to lower prices are advised to hold a short July-October strip at $3.75 to $3.95 and also a short November-March strip at $4.50 to $4.60.

Addison Armstrong of Tradition Energy hints that the market may be on track for a weather-driven slide. “Last week, gas prices fell below the key $4.00 for the second time in the past month as forecasts for normal temperatures and expectations for limited cooling demands in the coming weeks weighed on the market,” he said in a morning note to clients.

“Temperatures are expected to fluctuate in the coming weeks, with below-normal temperatures expected across the Central U.S. in the next 10 days, followed by a shift warmer to normal to above-normal temps in the 11-15 day forecast period. The Northeast is expected to see below-normal temperatures in the next five-days, followed by a shift to above-normal temperatures during the middle part of June. The Southeast is expected to see above-normal temperatures in the next five-days, followed by a shift cooler in the six-10 day forecast period before returning to above-normal in the 11-15 day forecast period.”

In an early survey Friday, Energy Metro Desk revealed an average expected build for Thursday’s government storage report of 98 Bcf, higher than historical averages. The survey queried 15 analysts and responses ranged from 90 Bcf to 105 Bcf.

Tom Saal, vice president at INTL FC Stone in Miami utilizing grouped weekly Market Profiles expects the market to test last week’s value area at $4.257 to $4.059 and “eventually to test” $3.912 to $3.734.

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