Spot natural gas prices on average fell 37 cents Monday, but if volatile New England pipes such as Algonquin, Iroquois and portions of Tennessee are factored out, the decline was about 3 cents.
Eastern points were generally weaker, and New England points endured multi-dollar losses. California locations were steady to slightly lower. At the end of trading, March futures had risen 1.4 cents to $3.315 and April had gained 1.6 cents to $3.369. March crude oil fell $1.60 to $96.17/bbl.
California traders noticed transportation incentives in place to maintain pipeline integrity. SoCal Gas has been offering a discount to move gas in order to achieve operational objectives. “For the month of February these guys can transport gas from SoCal Ehrenburg to SoCal Citygate for a penny. Normally it is 14 cents,” said a California analyst.
“They have been offering these discounts every month, but they don’t tell you until the last minute. They want to keep Ehrenburg stoked and by offering just a penny transportation from Ehrenburg to SoCal Citygate, they can maintain system integrity. They want to keep the Ehrenburg minimum high.”
Overall, price-wise the analyst said “$4 seems a little pricey, $3 is a little cheap, and $3.50 is neutral.”
Quotes at Malin were off 3 cents to $3.35, and gas into the PG&E Citygate eased 3 pennies as well to $3.62. Gas into SoCal Citygate was seen unchanged at $3.60 and SoCal Border points came in flat at $3.51. Deliveries on El Paso S Mainline were 5 cents higher at $3.57.
Points in the East held lofty levels as a series of fast-moving storms from Canada were forecast to slice through the East and Northeast. According to Matt Alto, AccuWeather.com meteorologist, “More light snow is on the way for towns and communities from the Great Lakes to the mid-Atlantic as yet another fast-moving storm originating from western Canada, called an Alberta Clipper, races east.
“The latest system is just one in a sequence of clippers that have been impacting many of the same areas since late last week. As is the case with most clippers, this storm system will produce a general light coating to a couple inches of snow with higher amounts possible in the higher elevations of the Appalachians. While significant snowfall is not expected, the snow will be a nuisance; especially for travelers. As the day progresses, the snow will spread towards the east impacting the cities of Indianapolis, Columbus, Cincinnati and Pittsburgh.”
AccuWeather.com predicted that Monday’s high of 33 in Boston would ease to 31 Tuesday before rising to 35 on Wednesday. The normal high in Boston is 37. New York City’s high of 30 Monday was anticipated to rise to 32 on Tuesday and 40 on Wednesday. The seasonal high in New York is 39.
Next-day gas on Dominion fell 6 cents to $3.29, and deliveries to Tetco M-3 slipped 58 cents to $4.02. Gas bound for New York City fell about 14 cents to $13.15.
Falling power prices made it difficult for next-day gas to achieve gains. IntercontinentalExchange reported next-day power into the New England Power Pool’s Massachusetts Hub fell $56.87 to $137.22/MWh. Real-time peak power at the PJM Western Hub dropped $7.97 to $39.50/MWh.
At the Algonquin Citygates, power for delivery Tuesday fell a stout $12.46 to $17.61, and on Tennessee Zone 6 200 L parcels for Tuesday delivery dropped $8.90 to $16.23. On Iroquois Waddington next-day gas slid $1.95 to $9.47.
Futures traders were not impressed with the day’s activity. “We had about a 10-cent trading range, but the volume was very light. We did do about 4,000 block trades on Clearport, but they were mostly March 2013s,” said a New York floor trader.
“Prices are holding, so that is a positive, and we closed above $3.30. We also saw $3.25 hold as support, and in the scheme of things, that’s a good sign.”
Weather forecasts show above-normal temperatures dominating the eastern two-thirds of the country. Commodity Weather Group in its Monday morning six- to 10-day outlook showed temperatures east of a sinuous line from East Texas to western Montana as much as five degrees above normal.
“It was not easy, but the models are slowly starting to converge on the mid-February pattern situation with the American models slowing down their bigger cooling and the European ensembles edging very slightly faster. We find generally good agreement on a warm-dominated six-10 day today except for colder weather in the interior West, Southwest and California,” said Matt Rogers, president of the firm.
“A transient cool push races across the Midwest and East late in the six-10 day before another warm-up ahead of a stronger potential Arctic air mass that bleeds into the West and then Plains by mid-to-late 11-15 day. The Euro ensembles are actually impressive with this event as they spike Alaskan ridging and send strong below-normals into the Plains by Feb. 17-18. This could reach Texas and the East in the 16-20 day range (Feb. 19-23).”
Tim Evans of Citi Futures Perspective said in closing comments Friday that “the warming trend in the temperature forecasts have weakened the storage outlook, although it has largely moved the dial from ‘moderately bullish’ to ‘neutral’ when it comes to comparisons with the five-year average outlook. Given the neutral storage data, there may be room for nearby futures to probe the downside further in anticipation of the seasonal warming trend and the approaching end of the winter storage withdrawal season.”
Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile looked for the market to test last week’s value area at $3.358 to $3.286 and “eventually” test $3.585 to $3.479. Saal is not specific in his timing, but typically value areas are tested within the next time period (week).
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