Natural gas cash prices on average rose 4 cents in Tuesday’s trading with gains in the Plains, Texas and eastern points leading the march higher. Wild and wacky weather conditions have proved a challenge to cash buyers, who are now devoid of much of their baseload and are at times having to dip into storage and pay penalties. At the close of futures trading, June enjoyed a bump up to $4.025, a gain of 10.0 cents, and July had risen 9.7 cents to $4.068. June crude oil fell 96 cents to $94.21/bbl.
“On May 2 we did 112,000 Dth and our normal May volume is about 40,000 Dth,” said a Midwest utility buyer. “We tripled our sales for a couple of days there. We had a record low on Saturday, and we really didn’t sell all that much gas, but it was sunny and also windy. I bought a lot of gas and didn’t need it, but that’s how it goes sometimes.
“Normally the pipeline doesn’t like for you to dip into storage in May, but Northern has been accommodating to us trying to deal with this weather for May. Everybody’s baseload goes away, and in April I injected gas into storage and then pulled it out again and paid the overrun. I’ve had to use storage more than I thought and you just have to pay extra in May to use storage,” he said.
Midwest points have been unseasonably warm and temperatures are easing but still expected to be above norms. AccuWeather.com forecast that Chicago’s Tuesday high of 88 would ease to 80 on Wednesday and 78 on Thursday. The normal high in the Windy City this time of year is 69. Kansas City’s Tuesday high reading of 92 was anticipated to ease to 85 on Wednesday and 80 on Thursday, five degrees above its seasonal norm. Omaha, NE’s searing high of 101 Tuesday was predicted to drop to 81 on Wednesday and reach 82 on Thursday. The normal high in Omaha is 73.
“We’re down to our summer loads now and will be dealing with electrical generation, but we didn’t budget much electrical load for May. The electrical generators are running today, but they are testing some equipment out. That could change quickly, and I’ve got a little storage gas and we can try and balance in the morning.”
Next-day deliveries on Alliance gained 6 cents to $4.06, and quotes at the Chicago Citygates added 5 cents to $4.04. On Northern Natural Ventura, next-day gas came in at $3.94, up 6 cents, and at Demarcation gas for Wednesday was seen at $3.94, up 5 cents. Deliveries on NGPL Amarillo changed hands 6 cents higher at $3.91.
Texas points ended the day in the black. Gas into Carthage added 6 cents to $3.92, and quotes at the Houston Ship Channel were seen 2 cents higher at $3.97. At Katy, next-day volumes were seen at $3.95, a penny higher, and on Transco Zone 1 Wednesday parcels were quoted at $3.92, 4 cents higher. Deliveries to El Paso Permian added 2 cents to $3.82.
Eastern points were generally in the win column. Dominion was seen at $4.02, 5 cents higher, and Tetco M-3 added 4 cents to $4.09. Gas bound for New York on Transco Zone 6 was down a penny at $4.12.
“Traders [bulls] are trying to push the market up against the current resistance area where we closed,” said a New York floor trader. “They are trying to push it up against resistance going into Thursday’s [storage] number, and that will determine the direction from there. If traders can pop it above this, then they will gain a little base, but I don’t think it will sustain longer term. “
He added that a bullish number Thursday would “give longs a chance to get out of the market before it fails.”
Last year, 57 Bcf was injected, and the five-year average stands at 83 Bcf. Tim Evans of Citi Futures Perspective estimates the build at 106 Bcf.
Before trading opened, top traders saw little in the way of weather developments capable of pushing prices higher but were willing to concede a test up to $4. “This week’s price action thus far appears suggestive of a balanced market that is unlikely to see much volatility expansion until Thursday when another round of storage numbers is released,” said Jim Ritterbusch of Ritterbusch and Associates.
“This week’s report will likely show a stronger build than the prior week’s injection with the implied deficit contraction restricting upside price possibilities. However, given our view that a lack of weather related demand has been discounted, we expect one more run at the $4 mark during the next couple of trading sessions prior to the Thursday EIA release that could easily trigger another down move into fresh lows.
“While bullish inclined traders can continue to cite a huge supply deficit against last year, we will note that stock is only about 5% below five-year averages with this difference expected to narrow appreciably as this month proceeds. While non-weather related or exogenous developments can always offer a surprise and throw a wrench into best laid trading plans, we feel that any such unexpected items are more apt to be bearish than bullish,” he said in a Tuesday morning note to clients.
Trading-wise, Ritterbusch said he is “allowing for a gradual lift back into the $4.00-4.05 area where we would advise shorts into the July contract. Downside possibilities still exist to around $3.75, in our view, per the nearby contract. As far as a longer term or position type trade is concerned, we are still placing a hold on longer dated back spreads such as January 2014 versus July 2013 and would suggest adding on any June price rallies to above the $4 mark.”
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile was looking for the market to test Monday’s value area at $3.970-3.934 and said the market “may eventually test $4.427-4.367 and $3.885-3.835.” Saal said he is not sure of the order.
June central Appalachian coal futures settled Tuesday at $60.12, up 14 cents/ton or $2.61/MMBtu.
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