Natural gas cash prices overall surged 17 cents on average Monday led by mega-gains extending from the Rockies to Chicago. Without losses posted at a handful of Northeast points, the average gain becomes 21 cents.
At the close of trading, May futures had slumped 4.3 cents to $4.082 but not before registering a new 20-month high at $4.18. June retreated 4.2 cents to $4.118. May crude oil gained 66 cents to $93.36/bbl.
Blizzard-like conditions were forecast for Denver and points east. “They are saying we could get 10 inches of snow with highs only in the 20s,” said a Denver producer.
“We may see CIG at a premium to Henry Hub if it gets as cold as they say, but mark my words, I think we are within two weeks of a peak in prices.
“You have got Tudor Pickering, Raymond James, Morgan Stanley and Goldman Sachs all turning bullish [see related story]. How many of these guys were bullish a few weeks ago when gas was at the low threes? Not a one of them, and here they are acting like they are gurus. I guarantee they will all be bullish at the peak.”
The producer is not optimistic going forward. “The storage comparisons in the following week are going to be impossible, and we are going to lose at least 2 Bcf/d to coal or maybe twice that,” he said.
Gas for Tuesday surged in the nation’s mid-section as forecasts called for blizzard-like conditions. “A wild storm will bring plunging temperatures and heavy snow from Colorado to Minnesota during the middle of the week,” said AccuWeather.com meteorologist Alex Sosnowski. “Areas from Denver to Rapid City, SD, Casper, WY, and Scottsbluff, NE, will have blizzard conditions in store spanning Monday night and Tuesday.”
“Several hours of whiteout conditions, combined with temperatures plunging into the teens and wind gusts between 40 and 50 mph, will make for dangerous travel conditions [and] the storm has the potential to drop between one and two feet of snow in north-central Colorado, southeastern Wyoming. the Nebraska Panhandle and the Black Hills area of South Dakota.”
AccuWeather.com forecast that the 67 degree high in Denver Monday would plunge to 18 Tuesday, along with 11 inches of snow. By Wednesday temperatures rise to 37, but the normal high in Denver this time of year is 59. Omaha was anticipated to see its Monday high of 76 ease to 57 on Tuesday and 44 on Wednesday. The normal high in Omaha is 61 this time of year. Chicago’s 65 degree high on Monday was anticipated to ease to 62 on Tuesday, but hit 55 on Wednesday. The normal high in Chicago is 56.
Quotes at Opal for Tuesday gas surged 30 cents to $4.02 and deliveries to the Cheyenne Hub jumped 32 cents to $4.06. At Northern Natural Gas Ventura next-day packages were seen at $4.24, up about 30 cents, and on Alliance gas traded at $4.30, up 25 cents. Chicago Citygate gas was seen at $4.26, up 22 cents.
New England points fell. At the Algonquin Citygates gas for Tuesday fell 13 cents to $4.59 and at Iroquois Waddington next-day parcels were at $4.62, 37 cents lower. On Tennessee Zone 6 200 L next-day packages were 34 cents lower at $4.51.
Eastern points participated in the broad market advance. Dominion came in 15 cents higher at $4.12 and Tetco M-3 was quoted at $4.36, 18 cents higher. On Transco Zone 6 into New York City gas was seen at $4.49, up about 10 cents.
Futures traders saw the day’s decline jumping the gun. “I think today’s sell off was premature, and I am looking for a run up to $4.30,” said a New York floor trader. “When prices started coming back down, they broke some key numbers at $4.14 and $4.11 and some more selling came in. I think if we can get this thing back above $4.12, we should make a run to $4.30.”
Recent gains notwithstanding, analysts are incorporating Friday’s weak employment report into their outlook for natural gas. “On Friday the economic news for the U.S. was quite negative. We saw one of the weakest non-farm payrolls in quite some time. It has been our feeling that natural gas is in the process of putting in a major bottom, but we feel the process is going to take quite some time,” said Mike DeVooght, president of DEVO Capital, a Colorado-based trading and risk management firm.
“We do think that the trade — buy natural gas and sell the complex — has a considerable amount of fundamental merit. If we continue to see manufacturing demand pickup, while countries abroad continue to weaken, you could make a case that natural gas will increase in value relative to the U.S. oil markets. This might support the natural gas markets while the positions are being established (open interest in the natural gas market has exploded over the past five to six weeks), but ultimately there is more than adequate supply to meet any uptick in natural gas demand. Ultimately, the long natural gas, short oil trade could work, but it could work because all of the energy markets go lower, but natural gas doesn’t fall as much as the oils. On a trade basis, we are short the summer strip for hedgers in the $3.75-3.95 range. If the winter should approach $5, we will start to establish a light short position.”
The weather outlook shows some warmth creeping into an otherwise mixed picture. “After an extended heating season, the Mid-Atlantic is poised to see its first 80-degree weather of the year in the coming days. The latest trends keep westerly flow to allow 80-plus conditions starting tomorrow and ending Thursday with a cold front for Philadelphia, Baltimore, DC, and Richmond (60-70s Northeast),” said Matt Rogers, president of Commodity Weather Group. His model interpretations show “humidity pick[ing] up with the event, but it should remain relatively dry/comfortable compared to summer equivalent 80s (with corresponding shorter-lived peaks). We also see a brief mid-80s spike in Burbank [CA] Wednesday of this week.
“Otherwise, the six-15 day range features a variable pattern situation that prevents any sustained strong anomalies. The East and South are more favored for warmer weather at times, while the Midwest to Pacific Northwest could see colder weather more frequently yet.”
That warmth apparently marks the end of the pervasive cool regime that has kept gas demand high across the Midwest and East. For the week ending April 13, the National Weather Service forecast sharply reduced heating requirements. New England is forecast to see 72 heating degree days (HDD), or 78 fewer than normal. New York, New Jersey and Pennsylvania should experience 59 HDD, or 70 fewer than normal. The Midwest is expected to have 95 HDD, or 38 fewer than normal.
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