Natural gas prices for Wednesday delivery overall averaged 4 cents lower in Tuesday’s trading. Nearly all points posted modest declines, and at eastern points, soft power pricing gave traders little incentive to make aggressive next-day gas buys.
The biggest declines were seen in the Marcellus Shale region, and at Great Lakes points prices were between a nickel and dime lower. At the close of futures trading the September contract had risen 2.1 cents to $3.534 and October was higher by 2.0 cents to $3.573. October crude oil romped higher boosted by unstable, international geopolitics adding $3.09 to $109.01/bbl.
Natural gas buyers reported concern about supply availability and anticipated stronger pricing as they made their September nominations. “We are going in a little heavier on September baseload volumes. There are some things currently happening [on Panhandle] and you just don’t know if it can get worse,” a Michigan buyer said. “Even if we put in an order, it doesn’t necessarily mean it is going to happen. We had to buy gas today since the weather is hot through the end of the month. On Consumers we paid more than we did last Friday, $3.83 and $3.87 and $3.77 on Michcon.
“Even though the Farmers Almanac is predicting bitter cold, our local weatherman is not predicting that [see Daily GPI, Aug. 27].”
Gas deliveries on Alliance for Wednesday shed a nickel to $3.72, and at the Chicago Citygates next-day quotes came in at $3.67, down 7 cents. On Consumers, Wednesday packages were seen at $3.83, down 6 cents, and Michcon deliveries changed hands at $3.75, down 8 cents. At Dawn, gas for Wednesday delivery fell 4 cents to $4.00.
At eastern points normal to slightly above normal temperatures were not enough to offset weak power pricing and next-day gas prices eased a couple of pennies. Forecasters are looking at warm August temperatures with anticipated doses of load-killing thunderstorms.
“Warm weather is in store for the Philadelphia area through Labor Day, but there will also be a few rounds of thunderstorms that may cause some disruptions,” said AccuWeather.com meteorologist Alex Sosnowski. “The periodic storms will help to keep a large heat wave at bay over the central states, where temperatures will surge well into the 90s to near 100 each day through the holiday weekend. In the Philadelphia area, the weather pattern should be great most of the time for late-summer activities such as swimming, ball games and outings, and high temperatures most days through the last unofficial weekend of summer will be well into the 80s. Temperatures can reach 90s on a couple of days. Nighttime lows will generally be in the upper 60s to lower 70s.
“There can be a couple of days where downpours are persistent enough to cause minor flash and urban flooding problems, as well as travel delays at the airport and along the I-95 corridor, Blue Route, Schuylkill Expressway and Turnpike. A few communities can also be hit with strong, gusty winds that cause sporadic power outages.”
The forecaster predicted that in Philadelphia Tuesday’s high of 88 would hold through Wednesday and ease to 86 on Thursday. The seasonal high in Philadelphia is 84. New York’s expected high Tuesday of 80 was predicted to rise to 84 Wednesday and ease to 83 on Thursday. The normal high in New York City is 81. Boston’s predicted Tuesday high of 80 was seen sliding to 79 Wednesday and 78 Thursday. The normal late-August high in Boston is 78.
Next-day power prices weakened. IntercontinentalExchange reported that next-day power into the New England Power Pool’s Massachusetts Hub eased 28 cents to $47.80/MWh, and deliveries to PJM West skidded $8.48 to $45.50/MWh.
Natural gas quotes for Wednesday delivery at the Algonquin Citygates were down 3 cents at $3.77, and deliveries to Iroquois Waddington fell 2 cents to $4.05. On Millennium gas was seen at $3.22, down 3 cents.
On Dominion packages for Wednesday eased 2 cents to $3.26, and on Tetco M-3 gas changed hands at $3.53, down 5 cents. Gas bound for New York City on Transco Zone 6 eased a penny to $3.67.
Gas on Tennessee Zone 4 Marcellus took the day’s biggest hit, falling 22 cents to $2.15.
Tim Evans of Citi Futures Perspective saw “Thursday’s DOE storage report coming into sharper focus, with the consensus expectations bracketing the 66 Bcf five-year average. The market is also seeing book-squaring, with options on September futures expiring today with the $3.50 strike in play.”
Weather forecasts moderated overnight. WSI Corp. in its morning six- to 10-day outlook predicts a cooler Northeast. “[Tuesday’s] forecast is colder over the West and Northeastern U.S. late in the period when compared to Friday’s forecast. Confidence in today’s forecast is near average as a result of better large-scale model agreement this morning when compared to yesterday. Temperatures could run even cooler than forecast over the Northeast under a digging cold trough, whereas warmer over the central Plains under a developing warm ridge.”
Analysts see changes in the weather outlook as possibly driving a continuation of the ongoing contraction in the storage deficit.
“[T]he dynamic of significant year-over-year storage deficit contraction could easily be revived following release of this Thursday’s report. We are expecting a 67 Bcf injection on Thursday, a build that would compare with last year’s 64 Bcf hike and the five-year average upswing of 66 Bcf,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report. “However, we will recognize that recent builds have fallen short of expectations as demand from the [power generation] sector remains a bit of a wild card. Some additional coal to gas displacement would appear likely despite this month’s price upswing. This could keep surprises within this week’s report tilted toward the bullish side again with nearby futures possibly making another brief run back to above the $3.54 level.”
According to technical analysts, futures need to work not all that much lower to support the case for resumption of the longer-term downward move. “So far, natgas has been unable to break down below $3.467-3.460-3.456-3.451,” said Brian LaRose, a technical analyst with United ICAP. “This zone marks the upper bounds of our proposed falling wedge, the lower bounds of an upward sloping trend channel, a=c down from the $3.562 high and 0.236 of $3.129-3.562. [We] see a break below this zone as a signal the $3.129-3.562 advance is being corrected, or worse, the down trend is resuming,” he said in closing comments to clients.
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