The cash market overall fell 2 cents on average Friday with weather-driven strength at Rockies points pulling prices higher and moderating California temperatures pulling prices lower, in some cases by double digits.
Futures prices were mixed, but short-term traders sense weakness, and the near-term technical picture is soft. At the close of futures trading, November had slipped a penny to $3.396 and December was higher by 0.2 cents to $3.682. November crude oil tumbled $1.83 to $89.88/bbl.
The cold incursion from the North helped lift Rockies points and tighten the basis. “It’s just like clockwork when you get cold in the Rockies. It [basis] can go the other way, too. If it’s cold out East and warm in the Rockies it will typically widen,” said a Denver producer.
CIG Mainline was quoted at $3.21, and Henry Hub finished at $3.26 for a tight 5-cent differential. On Wednesday prior to the cold’s major impact, Henry traded at $3.21, and CIG Mainline was seen at $3.08 for a 13-cent basis.
The producer was optimistic overall for Rockies gas prices. “Bentek has been saying Rockies prices will be weak since Clay Basin [storage] is down, but that is only 200 MMcf/d of injection capacity and a little cold weather will take care of that. Plus, we are not constrained anymore. Bentek and Kinder Morgan are saying we have 2 to 3 Bcf/d of extra takeaway capacity from the Rockies, so we shouldn’t have any [transportation] problems.
“In the past if Clay Basin went down and we did not have cold weather, you could see prices collapse and the differential widen because we didn’t have enough pipeline capacity to get it downstream. We do now. Those days are gone.
“What people are saying this year is that you’ve got plenty of takeaway capacity, but the downstream storage is full. There’s no doubt that we got a break here with the weather.”
Quotes on CIG Mainline for weekend and Monday gas added 4 cents to $3.21, and deliveries to Opal were flat at $3.23. The Cheyenne Hub was quoted 4 cents higher at $3.23, and deliveries to Northwest Pipeline Wyoming were unchanged at $3.16. Gas on Questar added 5 cents to $3.18.
Deliveries to California points took a hit as moderating temperatures were forecast. “While signs of winter are showing up from the Rocky Mountains into the Dakotas and possibly the Northeast, much of the western United States has thus far gone untouched. High temperatures the first part of this week reached record levels, with some places soaring well into the 90s and lower 100s clear to the coast. Places such as San Francisco had their warmest temperatures in over a year, and some spots even reached near 110 degrees,” said Anthony Sagliani, a meteorologist with AccuWeather.com.
“As the strong high pressure responsible for this extreme heat weakens and pushes off to the South, cooler air on a westerly wind will continue to filter in from the Pacific, allowing temperatures to become gradually cooler. This cooling trend is expected to continue.”
Weekend and Monday deliveries at the PG&E Citygate fell 3 cents to average $3.84, and at Malin gas was down a penny to $3.25. At SoCal Citygates parcels tumbled 14 cents to $3.50, and at SoCal Border points prices dropped 14 cents as well to $3.38. On El Paso S Mainline gas was quoted at $3.38, down a stout 17 cents.
Futures traders are not impressed with the market’s near-term prospects. “I know there is a little cold weather coming in, but I think that is built into the market,” said a New York floor trader. “I think we are looking at $3.20-3.25 over the next three sessions. If we were going to rally, it would have been [Friday] because on Fridays you usually get a little short-covering and the market rises, but we circled lower, and I think the market will come off on Monday.”
Others are taking an opposite view. “We are also leaving open the possibility that this market could be responding to some additional shifts toward moderation in the short-term temperature outlooks,” said Jim Ritterbusch of Ritterbusch and Associates. “In any event, [Friday’s] rebound of some 1.5% after testing nearest support would appear to suggest some additional upside follow-through early [this] week unless the weekend temperature views change considerably. We still expect support at the $3.33 area as we leave open the possibility of one more run at the $3.55 region. While such an advance may need to await another storage report, we are viewing [Friday’s] recovery as suggestive of renewed price strength.”
Tom Saal in his work with Market Profile correctly called the day’s moves in the November contract. He was expecting prices to work lower and test previous value areas. A value area is a pricing area, or range, one standard deviation about the mode, and includes approximately 70% of the entire trades that took place in that given time period. “The market has a tendency to want to test prior value areas, especially the prior day’s value area,” said Saal.
Thursday’s value area is $3.440 to $3.396, but Saal expects earlier value areas at $3.290 to $3.254 and $3.081 to $3.061 to “eventually” be tested.
The monthly employment report came in about as expected. The Department of Labor in its 8:30 a.m. EDT report disclosed that non-farm payrolls for September increased by 114,000, just a shade above expectations of 113,000. The unemployment rate, however, dropped to 7.8% from August’s 8.1%. Equity markets were slightly higher ahead of the report.
©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 |