Physical natural gas prices on average plunged 77 cents Monday, but free-falling prices on Northeast pipelines such as Algonquin, Iroquois and portions of Tennessee and Transco skewed the results. If those points are taken out of the mix, the decline was 10 cents. At the close of futures trading March had fallen 0.7 cent to $3.279 and April was down 0.9 cent to $3.346. March crude oil added $1.31 to $97.03/bbl.
With a blizzard in the region’s rear view mirror, next-day prices in the Northeast fell as temperatures were expected to rise above normal in spite of a front that was expected to move through the area. The National Weather Service in southeast Massachusetts said “precipitation will exit the region from west to east early [Monday] afternoon. A cold front will push through [Monday night]…followed by colder…blustery but dry weather Tuesday into Wednesday. Another coastal storm is expected to track well south of New England Thursday…but will have to watched closely. Yet another storm may affect the region next Sat followed by blustery and colder weather Sunday.”
Temperatures throughout the area were expected to be above normal. Forecaster Wunderground.com predicted the high in Boston Monday of 45 would ease slightly to 43 Tuesday and 37 on Wednesday, but the normal high is 38. New Haven, CT’s high Monday also of 45 was anticipated to slide to 41 Tuesday and 39 Wednesday. The seasonal high in New Haven is 37. New York City had a high Monday of 46, but that was expected to ease to 43 on Tuesday and 41 on Wednesday. The normal high in New York at this time of year is 41.
Lower next-day power prices also helped pave the way for weaker gas prices. IntercontinentalExchange reported that peak power for delivery Tuesday to the New York Independent System Operator’s Zone A delivery point in western New York fell $14.80 to $40.00/MWh. Zone G next-day peak power in eastern New York fell $8.70 to $105.00 and at PJM Western Hub next-day real-time power eased $2.14 to $35.68.
Quotes at the Algonquin Citygates skidded $6.97 to $24.50, and deliveries to Iroquois Waddington lost $9.76 to $5.18. On Tennessee Zone 6 200 L Tuesday parcels tumbled $5.27 to $24.41.
In the Mid-Atlantic next-day prices also fell. Tuesday deliveries on Dominion were off by 8 cents to $3.23 and gas on Tetco M-3 dropped 41 cents to $3.56. Deliveries into New York City on Transco Zone 6 dropped $15.00 to $5.50.
At points in the nation’s midsection a near-term warming trend was expected. Heating loads are often a function of minimum temperatures and minimums were forecast to make a significant rise, according to forecaster MDA Weather Services. It predicted that Wednesday’s low in Chicago would rise to 28, an increase of 7 degrees, and in Minneapolis Wednesday minimums were expected to be 7 degrees higher, also at 20. Dallas’ minimum was expected to reach 40 degrees Wednesday, 8 degrees higher.
Prices throughout the area weakened. On Alliance Pipeline next-day gas was seen at $3.34, 6 cents lower, and at the Chicago Citygates next-day prices also came in at $3.34, a nickel lower. At Demarcation parcels for Tuesday were at $3.30, 7 cents off the weekend and Monday pace, and at Northern Natural Gas Ventura next-day gas was quoted at $3.29, 5 cents lower.
On ANR SW gas for Tuesday delivery came in 5 cents lower at $3.17, and at the NGPL Midcontinent Pool Tuesday gas was quoted at $3.16, off 5 cents. NGPL TX OK deliveries were seen at $3.19, 6 cents lower, and on Panhandle Eastern next-day parcels were 5 cents lower at $3.16.
In spite of the first rise in the last three trading sessions, futures traders were not impressed with the market’s ability to hold technical support in the $3.20 area. “We are not having a great close,” said a New York floor trader. “Right in here is a good wait and see area. Watch for more sideways trading. We’ll probably stay in the mid teens to the $3.30 range.”
Somewhat longer term weather forecasts turned slightly cooler overnight. In its six- to 10-day outlook, WSI Corp. said it expected a cooler East and warmer West. “[Monday’s] forecast is colder in the eastern U.S. than the previous outlook while somewhat warmer over most of the West. Confidence is near to below average based on fair large-scale model agreement but in a highly changeable pattern.
“Temperatures may run colder across the eastern U.S. than currently forecast this weekend and early next week as all models indicate a highly amplified trough aloft.”
Addison Armstrong of Tradition Energy in Connecticut sees “the gas market continu[ing] to come under pressure from record production and more than ample storage supplies as traders focus on the remaining weeks of winter and the fast-approaching start of the slack demand of shoulder season.” He sees the March contract sliding lower for a third consecutive session.
Mike DeVooght, president of DEVO Capital Corp., is looking for selling opportunities. “Fundamentally, not much has changed in the gas market. We do feel the highest probability is for the gas market to continue to trade in the $3-4 range over the next few months. We will look for rallies above $3.60 to resell this market,” he said in a weekend letter to clients. Trading accounts and end-users are advised to stand aside.
In comments to Energy Metro Desk, Teri Viswanath of BNP Paribas said, “…[A]s the winter begins to wind down, even abnormally cold weather will only marginally impact the heating demand recovery.” She looks for ending inventory to exceed the industry “tipping point” of 2.0 Tcf by just a hair at 2.03 Tcf.
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