Physical natural gas prices Wednesday rose on average nationally by nearly 3 cents, and most points recorded gains ranging from fractional increases to a few pennies, while more than a handful of locations experienced small losses. Great Lakes and eastern points managed gains of 2-3 cents, but New England couldn’t escape the grip of a soft power market and it was flat to a penny lower. At the close of futures trading, July had added 5.8 cents to $3.963 and August was up 5.8 cents as well to $3.985. July crude oil slipped 20 cents to $98.24/bbl.
Midwest utility buyers expressed little interest in spot purchases. “It’s in the low 80s, so we aren’t buying much gas at all,” said a Midwest purchaser. The College World Series in Omaha is in full swing and “not much business was getting transacted. It’s almost like March Madness, and everyone is watching sports. There is lots of entertainment going on.”
Temperatures were supposed to get into the 90s for the weekend and evenings were forecast to fall to just the 70s, and “I think we’ll start seeing more load. It might actually turn into summer here pretty soon. We haven’t sold much gas for our power generation customers at all this month. We are still waiting on them. I did pick up a little gas last week when prices were down around $3.65, but otherwise whatever is left over after baseload is going into storage.”
Next-day gas on Alliance added 3 cents to $3.95, and deliveries to the Chicago Citygates rose by 2 cents to $3.97. Northern Natural Ventura gas was seen at $3.85, 4 cents higher. At Demarcation gas was quoted 2 cents higher at $3.84.
Northeast next-day power prices offered no encouragement to the gas market and prices eased. IntercontinentalExchange reported that real-time power deliverable to the New York Independent System Operator’s Zone A delivery point (western New York) Thursday fell 95 cents to $34.90/MWh, and gas at the New England Power Pool’s Massachusetts Hub fell $1.34 to $35.65/MWh.
Deliveries to the Algonquin Citygates fell about 3 cents to $4.04, and Tennessee Zone 6 200 L gas came in at $4.10, up a cent. Farther upstream gas into Iroquois Waddington added 5 cents to $4.27.
In the Mid-Atlantic next-day power prices firmed giving gas prices a modest lift. IntercontinentalExchange disclosed that next-day real time power at the PJM West delivery point rose by $1.21 to $37.95/MWh.
Quotes on Dominion for Thursday delivery added 3 cents to $3.7,7 and packages on Tetco M-3 gained 4 cents to $3.97. Gas bound for New York City on Transco Zone 6 rose by 3 cents to $4.01.
Wednesday’s gain was a positive “in the grand scheme of things, but there was not much volume and not much action. It was an orderly advance,” said a New York floor trader. The trader said natural gas prices were still bound by a $3.80-4.00 trading range.
That range may get tested following the release of storage data by the Energy Information Administration Thursday morning. Expectations are for a build above historical averages. Last year 63 Bcf was injected and the five-year average stands at 80 Bcf. Analysts at United ICAP are expecting an increase of 89 Bcf, and a Bloomberg survey also revealed a build of 89 Bcf. Industry consultant Bentek Energy forecasts an 84 Bcf injection.
Short-term, traders see the market poised to move somewhat higher. Toward the end of the day Tuesday, “we traded down to $3.865 and then went out strong,” said a New York floor trader. “It feels like traders want to take this market over $4.00. I don’t know if we’ll get there, and we might be between $3.80 and $4.00 for the next week or so. The Northeast is supposed to be moderate for the next 10 days or so, and there is nothing in the Northeast that is going to spike the market.”
Weather forecasts showed little change from Tuesday. Commodity Weather Group (CWG) in its six- to 10-day outlook shows above-normal temperatures from California to Maine and Texas to North Dakota. The Southeast and portions of the Pacific Northwest are seen as normal. “The models show decent agreement on next week’s six-10 day range (Monday-Friday) when we see a burst of heat early in the week and then pull back later in the week with a cool front,” said CWG President Matt Rogers.
“Temperatures and humidity levels should be about the same as recent heat events. Texas is slightly warmer in the six-10 day [Wednesday] as is Southern California (both slight above category). While the models are not as divided as they were [Tuesday], we still have some notable differences that keep the 11-15 day confidence on the lower side yet. The Canadian and American models are still generally warmer than the European, but at least now the ensembles show general agreement on focusing the heat ridge axis toward the Plains and Rockies in the 11-15 with debate about how much warming may expand east at times.”
Traders versed in Elliott Wave and retracement suggest that the market will find it tough to reach or break through $4.00. “So far, the $3.983-3.947-3.956 zone has provided resistance. In fact, Tuesday’s candlestick can best be described as a potential doji star top,” said United ICAP analyst Brian LaRose. “So, minor ABC bear market correction over? Only one way to indicate that is the case, get below $3.747. Clear resistance before $3.710 can be broken, expect the advance to continue.” Should that occur, LaRose cites the next technical objective higher at $4.08-4.18.
David Linton, a technical analyst with Updata in New York, sees his very short-term point and figure chart as bullish, with “an upside target of $4.09 and downside target of $3.83,” he said in a morning note to clients.
Tropical Storm Barry is bound for the coast of Mexico, according to the National Hurricane Center’s (NHC) 5 p.m. report on Wednesday. The storm was holding winds of 40 mph and headed to the west at 6 mph. It was about 70 miles east-northeast of Vera Cruz, Mexico and NHC had it reaching the Mexican coast Thursday morning.
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