Cash prices averaged about a nickel higher Thursday as cooler weather and higher prompt power prices kept the market well bid. Northeast points led the march higher with double-digit gains, but the move higher was broad and pervasive.
Gulf points were slightly less than a nickel higher. The Energy Information Administration’s 10:30 a.m. EDT release of storage data showing a 14 Bcf withdrawal was music to the bulls’ ears and prices closed at the high end of the day’s range. May finished at $4.139, up 5.4 cents after posting a new 20-month high at $4.185, and June gained 5.2 cents to $4.179. May crude oil tumbled $1.13 to $93.51/bbl.
A Gulf Coast trader expects higher gas prices to collide with a more competitive coal market at some point. “Prices have gone up somewhat faster than I thought. If the switch [to coal] happens, demand will fall and prices will go down,” said a Florida utility buyer.
Analysts have placed the “tipping point” at which price natural gas is no longer competitive with coal for power production somewhere in the neighborhood of $4.25 to $4.50. Currently, Gulf Coast prices are within striking distance and could be poised to stabilize or retreat, if the Gulf trader’s assessment is correct.
Quotes on Florida Gas Transmission Zone 3 for Friday delivery rose 3 cents to $4.12, and gas at Transco Zone 3 added 2 cents to $4.11. At the Henry Hub, gas was seen at $4.11 also, up 4 cents. Deliveries on ANR SE went for $4.09, about 4 cents higher, and on Tennessee 500 L next-day deliveries added 4 cents to $4.13. Tetco E LA came in at $4.04, up 3 cents.
At typically volatile Northeast points, next-day gas prices followed the path of real-time next-day power. IntercontinentalExchange reported that next-day real-time power into the New England Power Pool’s Massachusetts Hub gained $4.84 to $48.98/MWh.
Deliveries to Algonquin Citygates rose about 62 cents to $5.56, and parcels into Iroquois Waddington gained 28 cents to $5.17. On Tennessee Zone 6 200 L, gas for Friday delivery rose 44 cents to $5.36.
Farther south, next-day gas prices were also influenced by weak next-day power. IntercontinentalExchange reported that next-day real-time power at the PJM West Hub dropped $9.59 to $41.19/MWh.
Deliveries to Tetco M-3 fell 5 cents to $4.27, and gas headed for New York City on Transco Zone 6 shed 28 cents to $4.56. Dominion, however, was quoted 7 cents higher at $4.17.
A Northeast trader is looking for lower quotes in Friday’s trading. “Mark my words. It’s the weekend and temperatures in New England are warming up. Prices will head lower,” the trader said.
AccuWeather.com forecast that Thursday’s high in Boston of 49 would rise to 53 Saturday and 54 Monday. The normal high in Boston at this time of year is 54. New York City’s Thursday high of 59 was expected to hold for Saturday before reaching 64 on Monday. The normal high in New York is 59.
“The bull market is still intact,” said a New York floor trader. “I think $4.10 is the new support level, and if the current momentum continues, you might see the market come in a couple of cents higher Friday.”
Traders were cautious ahead of the release of storage data. Estimates were all over the map with one estimator, Price Futures Group, coming in at a whopping 67 Bcf withdrawal. Most other estimates were in the area of a 10 Bcf pull.
“The range is nutty. The standard deviation is high. The range between the three categories we track was a whopping 6.4 — and it only needs to be 3.0 Bcf to suggest a surprise,” said John Sodergreen, editor of Energy Metro Desk. The impact on May futures could be considerable. “In such a lowball market (the report is expected to be in the low double digits), a 5 to 10 Bcf surprise would likely send the market to the moon (and back). Our Metro Desk Consensus is considerably low at minus 13 Bcf; the average of all six surveys we tracked this week is much higher at minus19 Bcf.”
In any event, the deficit to both last year and the five-year average grew. Last year, 11 Bcf was injected, and the five-year average is a 15 Bcf build. Kyle Cooper of IAF Advisors in Houston expected a 9 Bcf withdrawal, and a Reuters survey of 21 analysts came in with a much higher 21 Bcf pull. The range on the survey was from minus 1 to minus 67 Bcf. Bentek Energy, utilizing its flow model, predicted an 8 Bcf withdrawal.
Near-term weather forecasts turned a little cooler. WSI Corp. in its six- to 10-day outlook said, “Today’s [Thursday’s] forecast continues to trend colder over much of the central U.S., whereas temperatures are slightly warmer over the Northeast.”
Addison Armstrong of Tradition Financial sees a firm tone to the market “as expectations of a tightening supply outlook and the nearly 25% of off-line nuclear power production continue to hold the market above the key psychological $4.00 level.” Tradition Financial was looking for a 12 Bcf withdrawal in the morning storage report.
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile was expecting May futures to test Wednesday’s value area at $4.157-4.111 before moving on and “eventually” testing earlier value areas at $4.046-4.014 and $3.946-3.904.
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