Cash natural gas prices skidded overall an average of 10 cents Monday as forecasts for mild temperatures and weakening power prices kept buyers at bay. Northeast points were particularly hard hit, but eastern and Great Lakes locations were also pummeled. At the close of trading January futures had managed a gain of 3.0 cents to $3.591 and February had risen 3.1 cents to $3.615. January crude oil added 18 cents to $89.09/bbl.
Northeast locations took some solid hits as forecasts of milder temperatures in major New England markets dampened any buying enthusiasm. “It’s unseasonably warm right now, and power loads are down so that [price] driver is out of the equation for the moment,” said a Houston-based Northeast marketer.
One factor that could moderate some of the violent price swings would be additional cargoes of liquefied natural gas, but “I haven’t heard of any, not with these numbers. There may be if something happens in Europe such as milder temperatures, but I haven’t heard of anything,” he said.
The New England Independent System Operator projected for Dec. 4 (Tuesday) total generation available would be 27,419 MW and peak load plus required operating reserves would tally 20,090 MW, leaving a healthy surplus of 7,329 MW.
IntercontinentalExchange reported that next-day power prices eased. At the New England Power Pool Massachusetts Hub next-day deliveries fell $7.85 to $47.14/MWh and at PJM’s western hub real-time peak power slid $4.14 to $33.01.
New England is likely to see above normal temperatures through Tuesday. “Surging temperatures over the Mississippi Valley from this weekend will continue to spread through much of the East through Tuesday,” said AccuWeather.com meteorologist Alex Sosnowski. “During Monday, temperatures were soaring into the 60s, 70s and 80s over a large part of the Central states [and] That air was already filtering into the mid-Atlantic and Southeast, but will reach into part of New England Tuesday.”
Those temperatures are set to change. “The warmth is surging ahead of a cold front gathering momentum over the Plains to start the week. Showers and stray thunder will spread eastward Tuesday over the eastern Great Lakes, the Ohio Valley and the lower Mississippi Valley. The showers will reach new England and the Mid-Atlantic later Tuesday night into Wednesday, and then the Southeast during the day Wednesday. In the wake of the front, temperatures will be shaved by 15 to 30 degrees in some of the Northern states, but only a handful of degrees across the South,” Sosnowski said.
His calculations show that more traditional December conditions will begin to kick into gear for part of the nation during the middle of the month. Until then, however, big temperature swings are likely to continue.
Quotes on Algonquin plunged. Next-day gas was quoted at $4.76, down about $1.33 and deliveries to Tennessee Zone 6 200 L tumbled $1.16 to $4.71. On Iroquois Waddington Tuesday deliveries fell about 83 cents to $4.31.
At locations further south prices eased as well. Gas on Tetco M-3 slid 5 cents to $3.64 and next-day packages on Dominion dropped 15 cents to $3.33. Deliveries on Transco Zone 6 New York lost 17 cents to $3.70.
AccuWeather.com projected Monday’s high in Philadelphia of 68 would hold through Tuesday before easing to 57 on Wednesday. The normal high for Philadelphia is 49. Baltimore’s high Monday of 70 was anticipated to also hold through Tuesday before slipping to 57 on Wednesday. The normal high in Baltimore is 50 this time of year.
Around the Great Lakes prices also fell. Tuesday gas at Chicago Citygate fell 4 cents to $3.53 and deliveries on Michcon skidded 9 cents to $3.59. On Consumers gas for Tuesday delivery fell about 6 cents to $3.64 and on Alliance gas for Tuesday came in at $3.55 or 4 cents lower. At Dawn, next-day gas was quoted at $3.89, down 15 cents.
Meteorologist Tom Skilling of the Chicago Weather Center forecast that Monday’s high of 65 would retreat to 51 by Tuesday before sliding to 42 on Wednesday. The normal high this time of year in Chicago is 40, according to AccuWeather.com.
A major brokerage house is rethinking its tune on 2013 natural gas prices. Morgan Stanley Dean Witter issued a report late last week indicating that analysts had previously been bulls, and the market had a chance to get to $5.00. However, analysts have changed their views and adjusted models to reflect new weather outlooks about 4% higher. They now forecast calendar 2013 at $3.80.
Mike DeVooght, president of Devo Capital, a Colorado-based trading and risk management firm, said to hold current positions. For trading accounts and end-users he counsels standing aside, and for producers and those with exposure to lower prices he said to hold short the balance of the winter strip initiated earlier at $3.75 to $3.95 and continue to sell any winter months should they trade above $3.75 to $3.95 for a light position.
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