On Friday and Monday the cash market had a fair amount of higher points mixed into an overall falling trend. But continuing weak fundamentals finally united the entire market in southward movement Tuesday, although just barely in one or two cases.
Most softening was moderate by about a dime or less; the Northeast and Appalachia recorded the lion’s share of declines from 15 to 35 cents.
A couple of traders said they didn’t expect a relatively modest screen gain of about a dime to be able to rally cash numbers. According to one, natural gas futures were carried higher mostly by dazzling displays of strength in the crude oil, heating oil and New York Harbor unleaded gasoline contracts. Crude skyrocketed by well over a dollar to more than $33 bbl, its highest level since just before the invasion of Iraq in March.
The lower Midwest is expected to have “atypical” high temperatures in the 60s for the rest of this week, said a regional utility buyer, so falling prices are the natural reflection of low heating demand. “But then the forecast indicates we’ll get our first snow of the season next week,” so market bearishness may be fading as bidweek goes into its final days, she added. The main question for the buyer and colleagues Tuesday, she said, was why energy futures were so strong.
Despite the huge surges by oil products, a Northeast marketer proclaimed himself “still bearish about all energy futures. It’s insane to have $33 oil.” Cash price movement in natural gas has been erratic lately, he said, but a rally this week looks unlikely. “Whatever forecast you look at — the three-day, the six- to 10-day, the eight- to 15-day — Northeast weather is due to stay unseasonably mild into next week.” Of course, the marketer ruefully added, “you might come in tomorrow and find that the forecasts have changed to cold.”
A buyer with a series of Florida Gas Transmission Zone 2 packages ranging from the mid $4.30s to the mid $4.40s said the overall pattern was “up for a while, then back down.”
Most remnants of air conditioning load in the South are being wiped out as a stormy system full of heavy rain moves eastward through the region after drenching Houston and other parts of Texas Monday. Only peninsular Florida was still likely to have appreciable warmth in the 80s Wednesday, according to The Weather Channel. On the other side of the thermometer coin, the Upper Plains will remain the repository of most of the nation’s really chilly weather for a while, although the currently moderate interior West can expect a move toward more winter-like conditions around Thursday, TWC said.
For the Nov. 24-28 period, the National Weather Service expects below normal temperatures in a wide swath stretching to either side of the Rocky Mountains and from the Mexican border to the Canadian border. It looks for above normal readings in the northern two-thirds of California and in most of the northeastern quadrant of the U.S. from Wisconsin through the upper edge of South Carolina. Otherwise normal conditions are predicted.
New York City-based Weather 2000 had a bit of encouragement for bullish types, saying that as cold and mild waves balance each other out, polar air is building and is poised to enter the U.S. next week. “Due [to] the fact that mild days have sprouted up this month, people have turned their head away from intra-month developments, because it’s not meeting their incredibly high standards of record cold to ‘be impressed,'” the consulting firm’s advisory Tuesday said.
“This is in spite of October coming in as a colder-than-normal month, and November likely doing the same for several locations…Both Thanksgiving week and the first week of December should each witness a significant early-winter polar air outbreak, with the greatest severity and southward penetration we’ve seen to date. Don’t expect February 2003 or January 1994 type cold (remember it’s only Thanksgiving), but preceded by more northern U.S. snows, these outbreaks should be the start of more dominant pattern themes and the reduction of extreme volatility.”
Some preliminary bidweek activity is occurring, but little of it is substantive, a couple of sources said. “We’ve had some people tell us they’re ready for December business, but we’re still getting our numbers in line,” said an East Coast utility buyer. A Northeast trader who reported some bidweek “tire-kicking going on” said the basis market for December was weakening Tuesday. Basis for most Northeast points was down 3-6 cents, he said.
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