Physical gas prices were mostly down Tuesday except for in the Northeast, where traders dug in and bought necessary volumes to see them through late-season cold and a series of storms.
New England locations recorded multi-dollar jumps, but many points elsewhere saw declines of up to a nickel. Futures continued their trek higher, recording a new high for 2013. At the close, April had added 8.7 cents to $3.969 and May was up 8.1 cents to $3.995. April crude oil sank $1.58 to $92.16/bbl.
A Northeast trader said, “PJM has some baseload [power] plants that are offline and had to buy 250,000 Dth to offset. That is not necessarily affecting the Massachusetts area but is a major contributor to the price of gas. That market is not getting the colder weather elsewhere. New York is a little warmer but still below normal. The Midwest is really cold.”
He added that with the stronger prices, basis differentials also were expanding. “April Algonquin [basis] is $1.48 [bid] at $1.53. Basis usually expands when you get these weather episodes. Monday’s settlement was $1.375. I look for a strong next-day market Wednesday with these weather events still in play.”
IntercontinentalExchange reported that next-day real-time peak power at the PJM West Hub rose $10.85 to $55.22/MWh and real time power into the New England Power Pool’s Massachusetts Hub added $14.25 to $86.06/MWh.
Tom Moore, a meteorologist at The Weather Channel, forecast blustery and blizzard-like conditions for the Northeast. Heavy snow is expected on parts of northern New York and northern New England, and rain is anticipated to change to a brief period of snow overnight in southern New England.
“Storm totals of 12 to 18 inches or more of snow are expected over parts of northern New York and northern New England [and] lake-effect snow begins in western New York, western Pennsylvania and West Virginia [Tuesday] tonight. Wednesday [temperatures] range from the 20s and 30s from western Pennsylvania to Maine to the mid 50s in central and eastern Virginia.”
Deliveries to Algonquin Citygates jumped $2.38 to $11.04, and deliveries on Tennessee Zone 6 200 L soared $1.69 to $10.36. At Iroquois Waddington Wednesday deliveries were quoted 20 cents higher at $6.13.
Farther south, gains were mixed. On Dominion, next-day gas was seen at $4.06, 2 cents lower, and on Tetco M-3 packages for Wednesday added two pennies to $4.25. Gas bound for New York City on Transco Zone 6 rose about 14 cents to $4.43.
Many market centers fell into the loss column. Chicago Citygate gas came in at $4.36, two pennies lower, and deliveries to Demarcation were down a cent at $4.33. At the Henry Hub, Wednesday packages fell 2 cents to $3.96, and El Paso Permian was quoted at $3.84, about a penny lower. PG&E Citygates slipped 2 cents to $4.16, and gas at the SoCal Citygates rose 2 cents to $4.16 as well.
Futures traders continue to speculate when and if futures will trade above $4. Drew Wozniak of United-ICAP noted that possibility with the extreme cold indicated in the National Weather Service six- to 10-day outlook. “I think our best shot at $4 will come on Thursday, so we’ll see a couple of runs at it, but it is likely to be a better idea to just play the $3.85-3.95 range as suggested by the options,” he said in a morning note to clients.
Other weather forecasts continue cold as well. In its Tuesday morning six- to 10-day outlook, WSI Corp. predicted substantial cold throughout the eastern seven-eighths of the country. “Today’s forecast has shifted the coldest temperature anomalies slightly further west when compared to yesterday’s forecast. As a result of this shift, today’s forecast is a bit cooler over the interior West and slightly warmer over the East.”
Analysts see the continuing cold as enough to send prices still higher. “Although [Monday’s] 10-cent selloff from fresh highs is providing a cautionary note to the bulls, we feel that the temperature factor remains sufficiently bullish to ignite one more sharp advance into fresh high territory with a $4 handle developing,” said Jim Ritterbusch of Ritterbusch and Associates.
“Updates to the weather outlooks still appear decidedly bullish, particularly across next week where much-below-normal temperature expectations are appearing pronounced across the eastern half of the U.S. that encompasses some key metropolitan regions. As winter-type demand is extended through the month of March, storage draws are looking unusually heavy, especially in relation to last year when around 20 Bcf was injected during March.”
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile was expecting the market to test Monday’s value area at $3.937 to 3.895. “Eventually” he looks for the market to work lower and test earlier value areas at $3.811 to $3.757 and $3.683 to $3.663. He said Friday’s and Monday’s price action gave indications of a possible market top.
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