Physical natural gas prices on average were unchanged Tuesday with some Northeast points showing strength along with the Rocky Mountains. Following Monday’s strength, futures prices reverted to the recent trend of probing lower as market technicians fear the worst and point to the likelihood of prices as much as a dollar lower by August. At the close of futures trading, May had retrenched 6.5 cents to $1.951 and June had fallen 6 cents to $2.048. May crude oil added $1.27 to $104.20/bbl.
The current differential between Northeast pipelines and the Henry Hub stands at about 35 cents, and traders look for that to remain steady. “It’s pretty mild weather for a while, and I think that basis will hold, not forever and ever, but if we get some heat in the region we will probably see a stronger basis,” said an eastern marketer.
“May Algonquin is at 30 cents, and a lot of gas traded for the summer. June is 37 cents, 42 for July and August, 37 cents for September, and October is 47 cents,” he said.
Weather conditions in the Northeast remained warm. AccuWeather.com reported that the high in Springfield, MA, Tuesday of 79 was expected to drop to 64 Wednesday, 71 Thursday and 73 Friday. The normal high for western Massachusetts at this time of year is 61.
Quotes on Algonquin Citygate gained more than a dime Tuesday, and deliveries to Iroquois Waddington and Tennessee Zone 6 200 L both added more than a nickel.
Although Rocky Mountain prices rose, producers were not impressed. “CIG is up three cents today at $1.77. Big deal,” said a Denver-based independent producer. “The big event will be on Thursday when Clay Basin returns to service. They haven’t been taking any injections since early this month and all that gas has been looking for another home. We may see a little strength in Rockies spot prices on Thursday.
“How high are Rockies prices going to get with the Henry Hub at $1.89,” he queried.
Gas at Opal and Cheyenne Hub were both quoted a few cents higher on the day, and Gas on Northwest Wyoming gained more than a nickel.
Deliveries across the Lone Star state firmed modestly for the most part. NGPL S TX, Katy and the Houston Ship Channel added 1-2 cents apiece, while Waha dropped a penny.
Futures analysts see the market likely to face some strong seasonal headwinds next month. “Seasonality really starts to turn bearish into mid-May. Can natural gas buck the trend? I don’t think so,” said an eastern analyst. “The cycles that are in place. I just don’t see how the bulls are going to be able to overcome that unless there is some sort of weather play in the next couple of months. It looks ugly for natural gas.”
Analysts see a market comfortable in the $2 area for the time being. “Although supply side fundamentals remain decidedly skewed in a bearish direction, we will note that speculative selling interest has virtually dried up at sub-$2 levels,” said Jim Ritterbusch of Ritterbusch and Associates. “As a result, this market will likely require either a price advance of significance or some bearish headlines prior to another downdraft into fresh 10-year low territory. But we do feel that a price rally to around the $2.12 area is possible purely on technical merits. As far as bearish headlines are concerned, the market will likely await Thursday’s EIA report prior to any meaningful selling,” he said in a morning note to clients.
“This week’s show of support appears to be pricing in a downsized supply injection that is apt to fall short of both year-ago and average increases. Nonetheless, a significant miss of 5-10 Bcf against average street expectations is still possible and could easily force another rush of speculative selling.”
Tim Evans of Citi Futures Perspective is looking for a build of 19 Bcf, below last year and the five-year average.
Market technicians see the May contract precariously perched on the edge of a cliff. On Friday technicians were not only not optimistic that the natural gas market would improve anytime soon, but also believed that unless a quick rebound from current levels was imminent, further deterioration of close to $1 was possible.
“As we noted in last week’s report, things are going to look very grim for natgas if it fails to reverse higher by the $1.965 area. As we write this, the low of the day is $1.959 and the last is $1.981, so there is no evidence whatsoever that a level of buyers has just been reached,” said Walter Zimmermann, vice president at United-ICAP. “Our bearish case is the $1.000 area later this year.”
©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |