Summer is over and the shoulder season, where air conditioners have been turned off and heaters have yet to be turned on, has arrived is the message that was sent by natural gas cash prices for the week ending Sept. 27, as a vast majority of individual pricing points across the country declined by 20-plus cents. NGI’s National Spot Gas Average for the week came in at $3.47, down 20 cents from the previous week.

California, which experienced moderating temperatures during the week, saw a decline of 25 cents — the largest drop of the week for a major region — to average $3.59. The Rockies declined on average by 24 cents to $3.29, while the Midcontinent averaged $3.42, down 22 cents.

Every other region dropped by no less than 19 cents for the week, except for the Northeast, where a couple of individual outliers skewed the region and the National Spot Gas Average. Thanks to large gains at a couple of points nestled in the capacity-constrained Marcellus Shale (Transco-Leidy Line up $1.57 to average $2.82, Tennessee Zone 4 Marcellus up 65 cents to $1.84), the Northeast as a region came in at $3.37 for the week, down 2 cents from the previous week.

Over in the futures arena, traders on Friday managed to ignore Thursday’s bearish 87 bcf storage report for a second straight session as the November contract closed at $3.589, up 2.2 cents from Thursday’s close but down 17.4 cents from the previous week’s finish. October futures expired on Thursday at $3.498.

In addition to digesting the news from the Energy Information Administration (EIA) that a much larger than expected 87 Bcf was injected into storage for the week ending Sept. 20, veteran hurricane forecasting firm Weather Services International (WSI) announced a “significant reduction” to its 2013 Atlantic Hurricane seasonal forecast.

“With only 30% of the season to go, 2013 has not been particularly memorable so far. Of the nine named storms so far, only two have reached weak hurricane status,” WSI Chief Meteorologist Todd Crawford said on Thursday. “Clearly, the more bullish preseason outlooks have not panned out this year, even with relatively warm tropical Atlantic Ocean temperatures and a lack of an El Nino event. The lack of instability due to warmer temperatures aloft has likely been one of the reasons for the quiet season. For the remainder of the season, we are forecasting six more named storms, three hurricanes, and one major hurricane. Clearly, this may still be too aggressive unless the fundamental background state changes significantly. We hope to learn from this outlier season heading into 2014.”

Closing out a disjointed week of ups and downs, physical natural gas prices for weekend and Monday delivery stayed the course Friday with most points adding or subtracting a few pennies to a nickel. However, Marcellus points proved squirrely Friday where too much production and not enough transportation continues to create a volatile situation in which 20-cent swings at certain points have become commonplace. In Friday’s action, the two largest offenders went in different directions for a change, with maintenance-plagued Transco-Leidy Line dropping 25 cents to average $2.91, while Tennessee Zone 4 Marcellus added 22 cents to $1.93.

“The situation remains the same,” said a Northeast trader.

“Too much gas is being produced in the region for the current takeaway pipeline infrastructure to manage, so you get these price swings. Some pipe expansion projects have already come online to help the situation, and more are on the table or under construction. We certainly need them.”

Commenting on the supply constraints of pricing points within the heart of the Marcellus Shale, David Thompson, executive vice president of Washington, DC-based Powerhouse, said the current situation plaguing the region is reminiscent of the Rockies a number of years ago.

“In the Rockies, the thinking was, ‘we’ve got all this gas, Chicago is going to want it all,’ but everyone jammed up the pipelines and you couldn’t get any more gas out.

“What is the value of gas [stuck] in the middle of the Piceance Basin? Just about zero. I think this is what we’re seeing with the Marcellus now.”

Marcellus gas is also changing the business plans of utilities. Five years ago utility National Fuel Gas Distribution Corp. put in place a long-term strategy to supply Pennsylvania and New York natural gas utility customers with gas from long-haul pipelines from the Gulf Coast. The Marcellus Shale has since sent that strategy out the window.

The local distribution company (LDC) sells and transports gas to more than 732,000 customers in western New York and northwestern Pennsylvania. It supplies gas to areas where winter is robust: Buffalo, Niagara Falls and Jamestown, PA, along with Erie and Sharon, PA. The Marcellus Shale now has provided low-cost fuel and more diversity “right under our feet,” Vice President Bruce Heine told an audience at the Shale Insight conference in Philadelphia. “It’s a great time to be a gas buyer in the Northeast,” he said. “No longer do we have the feeling that we’re sitting at the end of the pipeline with supplies 1,200 miles away…”

The distributor questions how much upstream capacity is needed as shale gas from the Utica and Marcellus expands. “Where will the pooling points develop?” asked Heine. “More infrastructure is needed for liquidity. Upstream capacity is needed for operations because of load capacity.”

In Tennessee Gas Pipeline Co.’s (TGP) Zones 4 and 5 in the Marcellus, “delivery is only fed by Tennessee…but its infrastructure is critical to our situation. Even with the Marcellus, we still need transmission capacity…” Heine pointed to new pooling points that are developing on TGP’s 219 and 313 points, which he said are “important for reliability…” At the 313 pool near Ellisburg, PA, “of late, the liquidity has diminished because it’s so constrained out there. We are watching the pool. As new infrastructure is built, liquidity should improve.”

The LDC also is monitoring points on DTI, Transco’s Leidy Line, NFSC and Tetco’s M-2. “We believe the development of these points are critical to purchase reliable supplies in the Northeast,” said Heine. “We would rather buy from a pooling point than specific wellheads. It gives us more choice”

Natural gas futures traders were still scratching their heads Friday following the screen’s nonreaction Thursday to news of a much larger than expected 87 Bcf build in storage for the week ending Sept. 20. “It was almost like the market forgot about the report. Our view is things are still about what you would expect for shoulder season,” said Powerhouse’s Thompson. “We had that rally in the market in mid-August that ran for three weeks that was based on a hot period to end summer. We’re through with that now, so we’ve got some chop. Why the market rallied on the back of what should have been a bearish number, I don’t have the answer for that. However, I do suspect we do have some more bearish reports to come as nobody is really running either their AC nor their heat.”

Thompson said he doesn’t believe the market will test the lows of August again before the traditional fall rally ramps up. “We’re still marginally bearish, but not for much longer,” he said. “Because everything has been playing out pretty close to normal during the course of this year when it comes to traditional seasonal price patterns, I suspect that normal fall rally is probably coming. Do I expect it to be a runaway to the upside? The answer is no, but it certainly has the possibility of getting back up into the $4s as we start to get some inklings of how winter is going to shake out.”

For Tim Evans of Citi Futures Perspective, traders are getting their feet back under them and looking for the market’s next move. “The natural gas market is little changed as traders sort out how much of the recent volatility was due to the expiration of the October futures contract and what valuation is appropriate given the larger than expected 87 Bcf net injection to U.S. natural gas storage for the week ended Sept. 20,” he said.

“Recent volatility in the storage data makes forecasting more challenging than usual, but we see potential for a 100 Bcf refill in the next report, bearish compared with the 82 Bcf five-year average for the date. We see potential for natural gas to trade somewhat higher in the near term, but would view that as a selling opportunity, as the relatively high rate of injections in the weeks to come will put downward fundamental pressure on values.”

As of Sept. 20, working gas in storage stood at 3,386 Bcf, according to EIA estimates. Stocks are now 179 Bcf less than last year at this time but 30 Bcf above the five-year average of 3,356 Bcf. During the week, the East Region injected 54 Bcf, while the Producing Region injected 25 Bcf and the West Region added 8 Bcf.