Physical gas for weekend and Monday delivery overall eased a penny as traders saw little incentive to buy a three-day package under conditions of mild expected weather and the ability to easily make intraday purchases as needed.
Northeast points took the biggest hits, but losses also took place at points farther south. Major market hubs were narrowly mixed. At the close of futures trading, July had fallen 8.1 cents to $3.733 and August was off 7.8 cents to $3.759. July crude oil fell $1.16 to $97.85/bbl.
“If buyers need gas over the weekend, they will just buy it with their iPhones, and it looks like temperatures in Boston will be slightly warmer on Monday, exactly normal on Tuesday, roughly the same on Wednesday, and Thursday, Friday and Saturday normal,” said a Houston-based northeast marketer.
The marketer ventured the opinion that prices would rise. “It’s warmer and temperatures are where they are supposed to be so there will be more demand, and prices should be higher in the Northeast [all other things being equal]. That doesn’t mean the screen doesn’t keep falling, but differentials should widen out a little bit and transport should work a little better. Demand should be higher and the difference to the Hub should widen.”
Forecaster AccuWeather.com predicted a rising temperature pattern across the Eastern Seaboard with mid-month readings reaching levels normally reserved for the end of the month. Both Boston and Hartford, CT, were expected to see highs over the weekend of 80 and holding into Monday. The normal high for Boston and Hartford this time of the month is 75, but by the end of June the normal high is 80.
New York was anticipated to see a high Saturday of 81 and 83 by Monday. The normal high is 79 and by the end of the month the seasonal high reaches 83. In Philadelphia, Saturday’s high of 82 was forecast to reach 86 Monday, four degrees above the mid-month norm but equal to the normal temperature seen at the end of the month.
Monday power prices throughout the region posted hefty gains. IntercontinenalExchange reported that Monday power at the New England Power Pool’s Massachusetts Hub gained $7.17 to $41.05/MWh, and deliveries to the PJM West Hub added $10.77 to $45.77/MWh.
Quotes for weekend and Monday gas at the Algonquin Citygates shed 14 cents to $3.73, and parcels to Iroquois Waddington were seen flat at $4.03. On Tennessee Zone 6 200 L gas prices came in at $3.81, down 5 cents.
On Dominion gas changed hands at $3.52, down 7 cents, and on Tetco M-3 weekend and Monday gas changed hands at $3.71, down 2 cents. Gas on Transco Zone 6 New York settled 10 cents lower at $3.64.
Prices at major market centers were a mixed bag. At the Henry Hub, weekend and Monday packages were 3 cents higher at $3.76, and gas into El Paso Permian was seen at $3.57, down 4 cents. At the PG&E Citygates gas was quoted at $3.82, unchanged, and at Opal weekend gas fell a penny to $3.51.
Futures traders are not optimistic. “I thought the market had to get above $3.85, and that is where it failed. I was looking for a much stronger rally going into the summer and this is pretty anemic. In the old days we used to say the price action dictates where we are going to go, and the action [Friday] was terrible. I would not be looking for a rally unless something really changes on the weather front,” said a New York floor trader.
“It’s very negative that the market is settling on the lows of the day, and although it did hold the lows for the week, if I had to look at it from the perspective of price discovery, I would not look very favorably.”
The trader said any sale of the market should be contained with a stop loss above today’s high. “I would put a stop between $3.83 to $3.85, for sure,” he said.
Others also concur that the bulls are going need a different weather outlook than present. Tim Evans of Citi Futures Perspective said that in Thursday’s trading following the expected 95 Bcf storage report by the Energy Information Administration, “the market did firm following the report as if to express relief the build wasn’t larger. And in fact, our own model had called for a larger 105 Bcf build, indicating just such a risk.
“The chief question for the market was how much the larger than expected 111 Bcf in the prior report had been due to lost demand related to the Memorial Day Holiday. The verdict is now in, and it looks as though the holiday had an exceptionally large impact on the market balance this year.”
Evans data shows a cool summer. “While the market is not always confident enough in long-range weather projections to trade on them, we do note that the updated seasonal forecast from Frontier Weather looks cooler than the prior outlook, with population-weighted cooling degree accumulations for the June-August span expected to run much lower than a year ago and somewhat below the five-year average as well. At the very least, we’d say this argues against looking for a sudden run of record-setting heat to revive the bull market.”
WSI Corp. of Andover, MA, in its Friday morning six- to 10-day forecast said, “Temperatures have trended cooler over the Northwest and Northeast when compared to [Thursday’s] forecast. Temperatures could run warmer over the central U.S. and southern MISO [Midwest Independent System Operator power grid] due to a developing warm ridge over the central U.S.”
WSI sees a pattern of lower than normal temperatures next week in eastern metropolitan areas. Boston’s 78 high Monday is expected to recede to 69 by Wednesday but rise to 75 by Friday. WSI sees the normal high in Boston this time of year at 77. New York City’s Monday high of 81 is seen dropping to 74 by Wednesday and climbing to 77 by Friday. The seasonal high at New York City’s La Guardia airport is 82, according to WSI.
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