The physical market was mostly flat Monday as some higher quotes surfaced in the constricted Northeast and also California and the Rockies, but eastern and Midwest points were steady to slightly lower. At the close of futures trading September had added 3.1 cents to $2.908 and October had gained 3.5 cents to $2.918. September crude oil rose 80 cents to $92.20/bbl.
Traders at Northeast points noted prices moving higher in after-hours exchanges. “The prices in the Boston and New England areas seem to trade after the average was set. Tennessee [Zone 6] averaged around $3.60 to $3.61 for the day, but I made a $4 trade late,” said a Houston-based northeast marketer. “I guess it was for some power plant needs. Sometimes they get late calls and have to buy additional gas.
“We actually did some deals over the weekend. It was intraday gas for Saturday and Sunday, and we price it by where things have been trading; usually a premium to where the next-day gas had been trading. Marcellus gas had been trading at about $1.30 for the weekend, but during the weekend days it was at $1.75 to $2.00.”
Northeast points showed some stout advances. Tuesday gas at the Algonquin Citygate added about 15 cents, and deliveries to Tennessee Zone 6 200 L gained more than 30 cents. Volumes into Iroquois Waddington rose more than a dime.
Algonquin Gas Transmission posted critical notices restricting secondary nominations at its Southeast and Cromwell compressor stations. It also restricted flows at its Mendon and Beverly meter stations.
Other eastern points moved only a couple of pennies. Tuesday gas into Dominion was down a couple of pennies, but Clarington parcels were quoted up about the same amount. At Tetco M-3 next-day gas rose about a penny and quotes for gas on Transco Zone 6 New York gained a couple of pennies.
Rockies points firmed. Quotes at the Cheyenne Hub and CIG Mainline were up about a nickel. At the Opal Plant next-day deliveries were almost 5 cents higher and on Northwest Pipeline Wyoming Tuesday gas was unchanged.
In the Midwest prices were steady to lower. Parcels on Consumers fell about a couple of pennies, but at the Chicago Citygate and Alliance next-day gas was flat. Deliveries to Michcon were also flat.
Futures traders are optimistic present prices levels will hold in the near term in light of plenty of time remaining for hot weather to develop.
“We peg technical support in the low $2.80 area, $2.82 to $2.84,” said Steve Blair, a technical analyst with Rafferty Technical Research in New York. “I would think we have some hot weather on the near-term horizon, but the only thing I think that can prevent the market reaching the low $2 area in September or October is some early cold weather; $2.25 would not surprise me by late October once the threat of hot weather passes.”
Much of Thursday and Friday’s decline was predicated on a more seasonal temperature outlook, and Commodity Weather Group in its Monday morning six- to 10-day outlook showed the entire eastern half of the country as normal. There were above-normal anomalies, but they are confined to Nebraska and Kansas, the Great Basin and southern California.
“Hotter Western weather is the main theme [Monday] with more impressive anomalies especially in California,” said Matt Rogers, president of the firm. “Sacramento should see low 100s later this week into the early six- to 10-day, with Burbank expected to see upper 90s to maybe low 100s into early next week. The Midwest and East continues to see a more significant break in the hot summer pattern with mostly seasonal temperatures, but a quick push of cooler-than-normal conditions is seen late in the one- to five- [day period] and early in the six to 10 (which could be briefly stronger).”
Rogers cautions that in the 11- to 15-day period warming is forecast in the East and Midwest, but he characterizes it as “weaker than recent heatwave activity. And as normal temperatures continue to fade, it becomes tougher to reach those hotter levels.”
Analysts see little reason to be on the long side of the market for now. “We feel that the gas market is in the process of making a major bottom, but we have a hard time getting excited about the short-term upside potential at this point,” said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm.
DeVooght suggests making no changes to his current strategy. He advises trading accounts and end-users to stand aside. Producers and those with exposure to lower prices should hold on to a long October stack of $2.50 put options designed to cover the summer strip initiated at a debit of 25-27 cents. “On a trade basis, we have been in a holding pattern right now.”
In its 2 p.m. EDT report the National Hurricane Center reported that Tropical Storm Ernesto was about 330 miles east of Honduras and winds had increased to 65 mph. It was moving to the west northwest at 12 mph, and projections showed it slicing through the Yucatan Peninsula.
What had been Tropical Storm Florence was downgraded to a post tropical low. Florence was 1,515 miles east of the Leeward Islands and had weakened to 35 mph winds. It was moving to the west at 15 mph.
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