The cash market Wednesday was on average less than a penny lower than Tuesday with noted strength seen at Northeast points and weakness reported in the Midcontinent and Midwest. At the close of futures trading the September contract had eased 3.1 cents to $2.933 and October was 2.1 cents lower at $2.961. September crude oil fell 32 cents to $93.35/bbl.
Power burn was in high gear in the Midwest. “We hit a 100 degrees Tuesday, and we sold our power customers quite a bit of gas and they continued to buy for tomorrow. Their nuclear plant [Fort Calhoun] is still down,” said a Midwest utility buyer.
The 476 MW Fort Calhoun plant is owned and operated by Omaha Public Power and is just one of the 19 nuclear plants shown as either offline or producing at less than 100% of full power in NGI’s NRC Power Reactor Status Report. The 19 nuclear plants’ generation represents a loss of 5,922 MW out of total U.S. capacity of 100,900 MW generated from 104 facilities.
The utility buyer added that it looked like it was going to get cooler in the evenings, and “if that continues it should make a difference in their loads. It’s too early to tell if any forecast of cooler weather will make a difference.”
Tom Skilling, chief meteorologist at the Chicago Weather Center, predicted Friday’s high would be only 73. “The coolest daytime temperatures in 6 weeks and first day since June 25 with a temperature unlikely to break above 80-degrees,” he said on the Chicago Weather Center website.
Gas for Thursday delivery at the Chicago Citygate fell close to a nickel, and deliveries to Northern Natural Gas Ventura shed a penny. Quotes on Alliance were flat and Michcon and Consumers were unchanged as well.
Prices retreated at Midcontinent locations. Deliveries to NGPL Midcontinent were about 6 cents lower and parcels on Panhandle Eastern fell a nickel. Quotes on NGPL Amarillo Line were also down 5 cents but ANR SW was off close to 2 cents. On Oklahoma Gas Transmission next day gas came in two pennies lower.
Northeast points rose as forecasts called for maximum temperatures to remain well above seasonal norms. Forecaster Wunderground.com predicted that Boston’s Wednesday high of 90 would ease to 88 on Thursday and 86 on Friday. The normal high in Boston is 81. New Haven, CT’s high Wednesday of 84 was predicted to slide to 82 on Thursday and 81 on Friday. The seasonal high is 79.
Quotes on Algonquin surged nearly a half dollar, and deliveries to Tennessee Zone 6 200 L gained about 30 cents, to put both pipes well above $4. Packages into Iroquois Waddington added about a nickel.
The ever-volatile Marcellus Shale region lived up to its reputation once again on Wednesday. One day after dropping 80 cents to average $1.06, Tennessee Zone 4 Marcellus on Wednesday rebounded to add $1.11 to average $2.17 (see Daily GPI, Aug. 8).
Short term traders see no clear trend. “We came off a little early, but sat for most of the day between $2.92 and $2.94,” said a New York floor trader. “I still don’t have a great feel for the market here. We are below $3, and if you put a gun to my head and said $2.75 or $3.15, I couldn’t tell you. It feels like a little more downside, since we couldn’t get above $3.”
Others noticed some curious trades in very distant contracts. “The front end is languishing and the back of the board is getting bid up,” noted INTL Hencorp Futures Vice President Tom Saal.
He pointed to a settlement over 20 cents higher in the thinly traded calendar 2020 strip. It settled Tuesday at $5.352 and during Wednesday’s trading it was bid at $5.56 for 30 contracts, 20.8 cents higher.
“Either storage is going to get a lot more expensive, we are going to see a lot of inflation, or we are going to be burning a heck of a lot of gas for electric power or the economy is going to make a tremendous rebound,” he said.
Estimates for Thursday’s Energy Information Administration (EIA) storage report show a continued contraction in the storage surplus. Analysts at United ICAP forecast a 32 Bcf increase, and Citi Futures Perspective analyst Tim Evans is looking for a 23 Bcf build. Industry consultant Bentek Energy utilizing its North American flow model forecasts a build of 29 Bcf. Last year 31 Bcf was injected and the five-year average is a 45 Bcf build.
Last Friday’s plunge, which took September down to $2.840, has technicians thinking the bullish case is in peril. “Last week [we] saw natgas reverse lower to a very bearish shooting star top on the weekly candlestick. Bearish RSI [relative strength indicator] divergence on daily and weekly charts accompanied that reversal lower,” said United ICAP Vice President Walter Zimmermann, who posted his comments in a weekly note to clients.
“And right before the reversal, sentiment reached bullish levels not seen since this time last year. In wave count terms, all the bears need now is a decisive close below the $2.800 level. That would effectively wreck the case for further upside. It would also set up the case for a deep correction of the entire $1.902 to $3.277 advance. For example, a 0.618 retracement would target $2.425, while a full 0.7862 would take natgas all the way back down to the $2.200 area. So it is rally or else time for the bulls.”
Monday and Tuesday’s advances, however, are forcing a recalculation of the bullish case for a continuation of the long-term advance, which has taken prices from a low of $1.902 to well above $3. Their figures show that the bulls would have to get prices above $3.175 to $3.207 to conclude that a near-term bottom was in place and further advances likely.
In its 5 p.m. EDT report Wednesday the National Hurricane Center (NHC) said Tropical Storm Ernesto had made landfall on the Yucatan Peninsula and was moving to the west at 13 mph. Winds were down to 50 mph, and the storm was projected to cross the Yucatan and enter the southern Bay of Campeche, most likely shutting in some oil production.
NHC is also following low-pressure area associated with a tropical wave west-southwest of the Cape Verde Islands. It gave the wave a 30% chance of reaching tropical cyclone status in the succeeding 48 hours. Also, the post-tropical remnant low of Florence was about 350 miles east of the Leeward Islands, and NHC gave it a “near zero” chance of regaining tropical cyclone force.
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