Closing out a disjointed week of ups and downs, physical natural gas prices for weekend and Monday delivery stayed the course Friday with most points adding or subtracting a few pennies to a nickel.

Once again, Marcellus points proved squirrely as the day-to-day capacity constraints were once again creating wide price swings. Over in the futures arena, traders managed to ignore Thursday’s bearish storage news for a second straight session as the November contract closed at $3.589, up 2.2 cents from Thursday’s close but down 17.4 cents from the previous week’s finish.

Down along the Gulf Coast, declines were more plentiful than gains as the shoulder season begins to take hold. The Henry Hub added 2 cents to average $3.50, while Columbia Gulf Mainline increased 4 cents to $3.42. Deliveries to Katy over the weekend and Monday added 1 penny to $3.41.

In California, cooler conditions led SoCal Citygate to come in at $3.61, down 2 cents, and PG&E Citygate was down a penny to $3.83.

Price action in the Northeast was once again dominated by pricing points tied to the Marcellus Shale, where too much production and not enough transportation continues to create a volatile situation in which 20-cent swings at certain points have become commonplace. In Friday’s action, the two largest offenders went in different directions for a change, with maintenance-plagued Transco-Leidy Line dropping 25 cents to average $2.91, while Tennessee Zone 4 Marcellus added 22 cents to $1.93.

Commenting on the supply constraints of pricing points within the heart of the Marcellus Shale, David Thompson, executive vice president of Washington, DC-based Powerhouse, said the current situation plaguing the region is reminiscent of the Rockies a number of years ago. “In the Rockies, the thinking was, ‘we’ve got all this gas, Chicago is going to want it all,’ but everyone jammed up the pipelines and you couldn’t get any more gas out. What is the value of gas [stuck] in the middle of the Piceance Basin? Just about zero. I think this is what we’re seeing with the Marcellus now.”

Marcellus gas is also changing the business plans of utilities. Five years ago utility National Fuel Gas Distribution Corp. put in place a long-term strategy to supply Pennsylvania and New York natural gas utility customers with gas from long-haul pipelines from the Gulf Coast. The Marcellus Shale has since sent that strategy out the window.

The local distribution company (LDC) sells and transports gas to more than 732,000 customers in western New York and northwestern Pennsylvania. It supplies gas to areas where winter is robust: Buffalo, Niagara Falls and Jamestown, PA, along with Erie and Sharon, PA. The Marcellus Shale now has provided low-cost fuel and more diversity “right under our feet,” Vice President Bruce Heine told an audience at the Shale Insight conference in Philadelphia. “It’s a great time to be a gas buyer in the Northeast,” he said. “No longer do we have the feeling that we’re sitting at the end of the pipeline with supplies 1,200 miles away…”

The distributor questions how much upstream capacity is needed as shale gas from the Utica and Marcellus expands. “Where will the pooling points develop?” asked Heine. “More infrastructure is needed for liquidity. Upstream capacity is needed for operations because of load capacity.”

In Tennessee Gas Pipeline Co.’s (TGP) Zones 4 and 5 in the Marcellus, “delivery is only fed by Tennessee…but its infrastructure is critical to our situation. Even with the Marcellus, we still need transmission capacity…” Heine pointed to new pooling points that are developing on TGP’s 219 and 313 points, which he said are “important for reliability…” At the 313 pool near Ellisburg, PA, “of late, the liquidity has diminished because it’s so constrained out there. We are watching the pool. As new infrastructure is built, liquidity should improve.”

The LDC also is monitoring points on DTI, Transco’s Leidy Line, NFSC and Tetco’s M-2. “We believe the development of these points are critical to purchase reliable supplies in the Northeast,” said Heine. “We would rather buy from a pooling point than specific wellheads. It gives us more choice”

Natural gas futures traders were still scratching their heads Friday following the screen’s nonreaction Thursday to news of a much larger than expected 87 Bcf build in storage for the week ending Sept. 20. “It was almost like the market forgot about the report. Our view is things are still about what you would expect for shoulder season,” said Powerhouse’s Thompson. “We had that rally in the market in mid-August that ran for three weeks that was based on a hot period to end summer. We’re through with that now, so we’ve got some chop. Why the market rallied on the back of what should have been a bearish number, I don’t have the answer for that. However, I do suspect we do have some more bearish reports to come as nobody is really running either their AC nor their heat.”

Thompson said he doesn’t believe the market will test the lows of August again before the traditional fall rally ramps up. “We’re still marginally bearish, but not for much longer,” he said. “Because everything has been playing out pretty close to normal during the course of this year when it comes to traditional seasonal price patterns, I suspect that normal fall rally is probably coming. Do I expect it to be a runaway to the upside? The answer is no, but it certainly has the possibility of getting back up into the $4s as we start to get some inklings of how winter is going to shake out.”

For Tim Evans of Citi Futures Perspective, traders are currently getting their feet back under them and looking for the market’s next move. “The natural gas market is little changed as traders sort out how much of the recent volatility was due to the expiration of the October futures contract and what valuation is appropriate given the larger than expected 87 Bcf net injection to U.S. natural gas storage for the week ended Sept. 20,” he said.

“Recent volatility in the storage data makes forecasting more challenging than usual, but we see potential for a 100 Bcf refill in the next report, bearish compared with the 82 Bcf five-year average for the date. We see potential for natural gas to trade somewhat higher in the near term, but would view that as a selling opportunity, as the relatively high rate of injections in the weeks to come will put downward fundamental pressure on values.”