Overall cash points fell on average by 10 cents Tuesday as the physical market played catch-up to Monday’s 16-cent drubbing of the spot futures. Eastern and Midwest points were particularly hard hit as mild temperatures also worked to limit loads. At the close of futures trading November had gained 8.3 cents to $3.535 and December had added 9.3 cents to $3.861. December crude oil continued its free-fall by losing $1.98 to $86.67/bbl.

Eastern marketers see a well supplied market with not much room to move higher. “I think storage is filling up and gas is going to need to find a home. It’s not that cold, and I don’t think we are going very far from here,” said an East Coast trader.

“Basis is fairly weak when you look at it. Algonquin is at about $3.70, and Henry Hub cash is about 35 cents lower. Tomorrow is the coldest day and then it warms up. I don’t think basis or absolute price is going very far from here. There’s nothing on the horizon to push things very far either way. My guess is that cash will be fairly weak in November.”

East Coast points were forecast to cool before warming toward the end of the week. AccuWeather.com predicted that Boston’s Tuesday high of 66 would fall to 57 on Wednesday before rising to 61 on Thursday. The normal high at this time of year in Boston is 59.

Quotes on Algonquin dropped 6 cents to $3.71, and Wednesday deliveries into Iroquois Waddington were flat at $3.83. On Tennessee Zone 6 200 L next-day gas was down a penny at $3.83.

Temperatures in Philadelphia and New York were forecast to remain above seasonal norms going into the latter half of the week. AccuWeather.com predicted that Tuesday’s high in New York City of 64 would ease to 63 on Wednesday before inching up to 64 on Thursday. The normal high in New York at this time of year is 62. Philadelphia was expected to remain well above normal. It’s Tuesday high of 74 was anticipated to reach 75 on Wednesday before slipping to 69 on Thursday, still well ahead of the normal high of 65.

Wednesday gas at Tetco M-3 tumbled 13 cents to average $3.52, and deliveries on Dominion shed 15 cents to $3.34. Transco shipments into Zone 6 New York fell 12 cents to $3.49.

In the Midwest near-record setting temperatures were in play and next-day prices skidded lower.

“Temperatures more fitting of mid-September than the last week of October will leave record highs at risk of falling by the wayside Wednesday and again Thursday. Tuesday, the surging warmth even triggered a few summer-like downpours in central and northern Indiana, but these served only to delay, not forestall, the inevitable spike in temperature,” said Jim Andrews, an AccuWeather.com meteorologist.

“Highs in the upper 70s and even the lower 80s, or 15 to 20 degrees above normal, will be set statewide. Already, Indianapolis registered a balmy 75 degrees on Monday as the warm spell got well under way. Forecasts for Wednesday and again Thursday show highs of 78 degrees for Indianapolis.”

Next-day gas at the Chicago Citygate shed 12 cents to average $3.41, and deliveries on Michcon were 8 cents lower at $3.48. On Consumers buyers were fortunate enough to pay 11 cents less at $3.46, and at Dawn Wednesday parcels were off 6 cents to $3.59.

Futures traders saw the day’s gains “as a little short-covering. There is nothing new weather-wise and no new length coming into the market,” said a New York floor trader. The trader added that he thought the highs for the market were in “as long as everything stays the same. I just don’t see us rallying. The weather is changing, but nothing severe is coming in, so I don’t particularly see any reason for there to be a sharp rally. I think the market is comfortable where it is right now.”

He added that for him to change his mind on the market there would have to be “some change in the weather, like a long-term cold spell.”

Analysts didn’t see Monday’s decline as the start of something new. Jim Ritterbusch of Ritterbusch and Associates thinks the “market may have gotten a bit ahead of itself by advancing as much as 24% just within the past month. But we are not viewing [Monday’s] 4% pullback as the beginning of a sustainable down trend,” he said. “To the contrary, we still anticipate some fresh highs following a recent show of resistance at the $3.64 level per nearest futures. We are still viewing the $3.72-3.82 region as a buy zone where we would add to an existing core long holding. Stop protection would be advised below the $3.71 level on a close-only basis. Upside possibilities still exist to the $4.10 area [December].”

He added that Monday’s decline resulted from traders’ attention shifting “back toward this week’s significant temperature warm-up and away from next week’s cold spell. We are also conceding to a mix of ideas beyond the end of this month that could offer a return toward normal or seasonal trends. These short-term temperature views will remain as an important driver of price in spite of the fact that major deviations at this time of the year don’t usually associate with dramatic usage shifts,” he said in closing comments to clients.

Tom Saal, vice president at INTL Hencorp in Miami, in his work with Market Profile looks for the market to stage something of a rebound. He suggests that November futures will test value areas of $3.637 to $3.507 and eventually $3.290 to $3.254 if time permits. Typically, value areas are filled the next day. A value area of the profile is defined as a price range one standard deviation about the mode. One standard deviation is approximately 70% of the entire trades that took place in that given time period.

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