Natural gas traders tended to business at hand Monday and ignored the maelstrom engulfing global financial markets. With the exception of a few Northeast locations most points traded a few pennies lower, and NGI‘s National Spot Gas Average was flat at $2.48.
Northeast points on average firmed a little over a nickel as temperatures pushed above seasonal readings and spot power prices remained firm. Futures prices groped lower as well with little heed paid to the cascading equity markets. At the close, September had dropped 2.6 cents to $2.650 and October was off 4.1 cents to $2.656. October crude oil moved more in sympathy with financial markets. October settled $2.21 lower at $38.23/bbl. The Dow Jones Industrial Average lost another 589 points to 15,871.
Trading in equity markets Monday was a slight variation of Friday, but natural gas futures proved more resilient. Major indices such as the S&P 500, DJIA, and Nasdaq all hit the skids early after index futures contracts hit their daily loss limits in pre-market trading but since moved off their lows of the day.
A New York floor trader thought the market might test the low $2.50s in something of a sympathetic reaction to crude oil, but looking at the broader impact of the falling stock market said he thought this decline represented a buying opportunity. “The market will take back its losses,” he said.
Does the natural gas market need to concern itself with a weakening economy? According to one market strategist, the U.S. economy is alive and well, and by extension fundamental factors affecting natural gas seem unlikely to be impacted. “U.S. economic trends are still very much driven by domestic phenomenon and data points continue to intimate growth as opposed to developments overseas that are creating turbulence and distressing investors,” Tobias Levkovich, chief equity strategist at Citigroup, told Bloomberg.
In his view, automotive and housing are the two key sectors to look at to gauge the health of the American consumer and economy, and they still look robust. In addition, U.S. employment, plus consumer and capital spending (ex-energy) remain on track, he said.
Even though short-term weather is supportive, natural gas prices seem influenced by expected stout increases in storage builds as longer-term weather moderates.
“The fact that this market is posting fresh summer lows at the start of this new week despite seemingly supportive weekend adjustments to the short-term temperature outlooks would appear to favor some further price weakening,” said Jim Ritterbusch of Ritterbusch and Associates in weekend comments to clients. “Furthermore, this market appears unwilling to inject significant storm premium in response to TS Daniel and a couple of distant evolving storm systems that could eventually disrupt production activities in the Gulf Coast region.
“This heavy tone appears to be emanating from an ongoing lift in production, an unexpected upswing in imports and this week’s unusually mild temperature trends that are apt to boost supply injections considerably next week. Furthermore, this week’s build should be upsized by around 10-15 Bcf relative to the prior week’s build. Finally, we see some bearish spillover from the petroleum complex in the form of margin call selling.”
“Warmer changes are seen for the Midwest and East compared to [Sunday],” said Commodity Weather Group in its Monday morning outlook, “but some slower timing issues from Friday still offer some demand losses earlier in the period with some slight gains toward the 11-15 day for a net result that is close to flat. Early September warmth is mainly 80s for the East Coast, but some low 90s potentially for the lower Mid-Atlantic,” said Matt Rogers, president of the firm.
Next-day gas at northeast points gained ground buoyed by supportive temperature forecasts and higher next-day peak power. Wunderground.com forecast that Boston’s high Monday of 75 would rise to 78 Tuesday before advancing to 81 Wednesday. The normal high in Boston is 79. New York City’s Monday high of 86 was expected to hold Tuesday before easing to 84 Wednesday, 2 degrees above normal.
Northeast next-day power rose, but farther west Tuesday peak power eased. Intercontinental Exchange reported that on-peak power for delivery Tuesday to the ISO New England’s Massachusetts Hub rose $3.16 to $42.99/MWh, yet power at the PJM West Hub fell $5.28 to $34.28/MWh.
Midwest deliveries were soft. Gas on Alliance was off a penny at $2.76, and parcels at the Chicago Citygate fell 5 cents to $2.72. Gas on Michigan Consolidated changed hands 5 cents lower at $2.88, and next-day packages on Consumers retreated 6 cents to $2.90.
Westbound gas on REX lost about a nickel. According to NGI‘s Rockies Express Zone 3 Tracker, gas deliveries at the Moultrie, IL, interchange with NGPL came in 5 cents lower at $2.59, and packages at the Shelby, IN, junction with ANR fell a nickel to $2.60.
In its 11 a.m. EDT Monday report the National Hurricane Center (NHC) said Danny had fallen to 30 mph and was a disorganized low. NHC said it issued its last report on Danny but said it was following two systems in the eastern Atlantic. The first was a system of showers and thunderstorms about 950 miles east of the Lesser Antilles that was given a 90% chance of storm formation in the succeeding 48 hours. A second system of lower pressure was being monitored east of the Cape Verde Islands.
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