Cash natural gas prices overall declined an average of 2 cents Monday, but if the sharp declines posted at a handful of Northeast points are excluded, the overall market would have shown an average rise of 6 cents.
With the exception of the New England losses, nearly all points made gains, including the East, Midwest and Gulf Coast. At the close of futures trading April had risen 2.0 cents to $3.649 and hit a new high for the year, with May up by 1.6 cents to $3.689. April crude oil gained 11 cents to $92.06/bbl.
Expected above-normal temperatures in Boston and the New England region were enough to send prices at some Northeast points to hefty losses. “It’s not exactly spring-like in Boston just yet, but it is getting there. That’s enough to knock a dollar and a half off the price of gas easily,” said a Houston-based marketer. “Power prices are in the tank, but it still pays to transport gas and keep everything flowing. As long as [Algonquin] doesn’t dip below [Tetco] M-3 it will pay to move it from M-3 in Lambertville, NJ up to Algonquin Citygates.”
“We haven’t reached that point, yet. M-3 has been trading right around $3.85, but we are getting close. Algonquin was about $5.01 and Tennessee $4.94. M-3 prices act as a floor. Gas will seek the highest price as long as there is the capacity to get it there,” the marketer said. The marketer thought that prices for gas later in the week would rise as temperatures cooled. “That front that came through Denver over the weekend hit Houston and is headed east. That should cool things down.”
Temperatures were forecast to rise and then fall. AccuWeather.com forecast that Monday’s high in Boston of 49 would climb to 53 Tuesday before retreating to 38 on Friday. The seasonal high in Boston is 44. Hartford, CT’s Monday high of 52 was expected to reach 53 on Tuesday before dropping to 42 on Friday. The normal high in Hartford this time of year is 48.
IntercontinentalExchange reported that peak, day-ahead power for next-day delivery at the New England Power Pool’s Massachusetts Hub fell $11.20 to $43.82/MWh. Power at the PJM West Hub for Tuesday delivery added 17 cents to $38.14/MWh.
At the Algonquin Citygates, next-day gas plunged 91 cents to $5.14, and at Iroquois Waddington deliveries Tuesday dropped 41 cents to $4.65. On Tennessee Zone 6 200 L next-day parcels were seen $1.15 lower at $5.02.
Farther south prices firmed. On Dominion Tuesday gas was quoted at $3.65, up 12 cents and at Tetco M-3 gas came in at $3.81, higher by about 8 cents. Gas bound for New York City on Transco Zone 6 added 12 cents to $3.87.
Gulf points were firm. On ANR SE gas for delivery Tuesday rose 6 cents to $3.59 and on Transco Zone 3 prices for Tuesday gained 6 cents to $3.64. At the Henry Hub, prices for Tuesday packages also added about 7 cents to $3.64, and on Tetco E LA next-day gas gained 4 cents to $3.55. Gas on Tennessee 500 L rose 6 cents to $3.61.
In the Midwest, next-day prices added about a nickel at most points. At the Chicago Citygates, Tuesday deliveries rose 3 cents to $3.75, and on Michcon Tuesday packages added about 7 cents to $3.80. Consumers Pipeline deliveries for Tuesday fetched $3.80, 5 cents higher and on Alliance gas was seen at $3.76, 5 cents higher. Deliveries to Dawn were unchanged at $3.93.
Meteorologist Tom Skilling of the Chicago Weather Center predicted the high in Chicago Tuesday would be a chilly 39 with an outlook that was “mostly cloudy and chilly with lingering snow flurries. High temperatures about 6 degrees below the seasonal normal. Continued mostly cloudy at night.”
Futures traders were a little nonplussed by the day’s gains. “It looks like the market wants to work higher, but I really don’t see the reason,” said a New York floor trader. “I think the next level higher from here is $3.73-3.74, and above that $3.81-3.83, but I just don’t see what reason the market would have for going there.”
Analysts suggested that last week’s weather is likely to be supportive at least in the short run. “Good snow coverage, a few new snowstorms and rising equity markets were enough to help push the gas market higher this past week. The residual snow coverage should give a boost to heat demand and provide a little support to the gas market,” said DEVO Capital Management President Mike DeVooght.
“Unfortunately, a little cold and snow will not change the big picture for the gas market. We could see a late winter rally but it will be difficult to hold the gains as we approach spring. On a trade basis, we continue to look for rallies in the summer strip (any months that trade above $3.75) as an opportunity to add to our short positions.”
DeVooght suggests that end-users and trading accounts stand aside. Producers and those with exposure to lower prices should hold short a July-October strip at $3.75 and “work to sell any summer months above $3.75-3.95 (light position).”
Weather forecasters see continued blocking in place, which should work to keep temperatures on the cool side. MDA Weather Services in its morning six- to 10-day forecast said, “The forecast is colder across the northern tier compared to Friday’s expectations but also slightly warmer in the Southeast. Blocking over the North Atlantic (-NAO) [North Atlantic Oscillation] should remain a major influencer in the outcome, both keeping the cold threat in place across the North and suppressing the mean storm track.
“Though models offer a wide array of possibilities, the large-scale pattern could offer yet another coastal storm along the East, especially late. Warmth will be strongest at the onset from the Southwest to Texas, with some moderation likely during the second half. Confidence is moderate overall.”
Addison Armstrong of Tradition Energy sees a firm market “as lingering cold weather and expectations of elevated heating needs continue to propel the market higher. Gas prices pushed to a three-month settlement price high to end last week’s trading as late season cold, larger-than-expected storage withdrawals and a high level of nuclear power plant maintenance combined to boost gas prices above $3.60 for a second time this year.”
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