U.S. natural gas cash prices on Monday for Tuesday delivery gained about 20 cents on average, making up just about all of Friday’s decline. The gains were widespread and cool weather forecast to grind its way east along with a firmer screen were all the motivation buyers needed. The Mid-Atlantic and West Coast posted the most notable gains. At the close of futures trading December had risen 6.7 cents to $3.570 and January was higher by 6.1 cents to $3.695. December crude oil eased 50 cents to $85.57/bbl.
Traders expect more physical price strength Tuesday folllowing a late surge from the screen. “The screen was down most of the morning and didn’t trade very high, the Hub was trading around $3.40 and the screen $3.50,” said an eastern marketer. “After most of the [cash] trading was done, the screen decided to tick up. We’ll see higher cash prices Tuesday because of that and assuming nothing happens to the screen overnight.”
The day’s gains at eastern points occurred in spite of abundant near-term supplies. “The colder weather that’s hitting the Midwest is probably a day away from the East Coast,” he said.
Temperatures were forecast to take almost a 20 degree slide over the next two days. AccuWeather.com forecast that Boston’s high of 65 Monday was expected to drop to 59 Tuesday and 47 on Wednesday. The normal high in Boston this time of year is 53. Hartford’s 66 high Monday was anticipated to fall to 54 on Tuesday and 47 on Wednesday. The seasonal high in Hartford is 54.
Quotes at Algonquin Citygate added 12 cents to average $4.64 and deliveries to Iroquois Waddington gained 17 cents to $4.63. Parcels on Tennessee Zone 6 200 L were up by 11 cents to $4.67.
Mid-Atlantic temperatures were also expected to take a plunge. AccuWeather.com said Monday’s high in New York of 65 would drop to 52 Tuesday and 50 on Wednesday. The seasonal high in New York is 56. Philadelphia’s 71 high on Monday was forecast to drop 20 degrees on Tuesday to 51 and reach 50 by Wednesday. The typical high in Philadelphia is 58.
Gains in the Mid-Atlantic were heftier. Tuesday deliveries on Dominion added 20 cents to average $3.53 and gas on Tetco M-3 rose 27 cents to $3.72. Gas destined to New York on Transco Zone 6 saw a 25 cent rise to $3.68.
Next-day prices in southern California surged as forecasts called for warm days and cool nights. The National Weather Service in Los Angeles said “high pressure across the area will maintain clear skies today through Tuesday. The main forecast issues for the short term will include gusty northeast winds across much of Los Angeles and Ventura counties today…very low humidity values in many areas…and continued sub-freezing temperatures across the interior deserts tonight.”
At Malin next-day gas rose 16 cents to $3.56 and deliveries to PG&E Citygate gained 17 cents to $3.87. At SoCal Citygate Tuesday deliveries rose 34 cents to $3.87 and gas at the SoCal Border added 36 cents to $3.78. Deliveries on El Paso S Mainline surged 39 cents to $3.82.
Midwest quotes firmed as temperatures were forecast to be well below normal. Tom Skilling, meteorologist at the Chicago Weather Center said Tuesday would be “Mainly sunny but continued quite chilly with highs  about 7 degrees below normal. West-southwest winds 8-15 mph.”
Tuesday gas on Alliance rose 20 cents to $3.77 and deliveries to the Chicago Citygates added 20 cents to $3.73. Gas at Northern Natural Ventura jumped 23 cents to $3.65.
Longer term forecasters saw little change in the near-term outlooks. WSI Corp. of Andover, MA, in its six- to 10-day outlook predicts above-normal temperatures for the western half of the country with below-normal temperatures confined along the East Coast from Virginia to Florida. “[Monday’s] forecast is a little warmer than yesterday’s outlook in portions of the western U.S. while slightly cooler for parts of the Deep South-Southeast. There are few major changes.”
The forecaster said there was “reasonably good large-scale model agreement but also a few technical differences. Temperatures may still run cooler over the southeastern U.S. under a redeveloping trough. Readings, meanwhile, could trend warmer from the Midwest through interior western U.S. under a ridge aloft. (Portions of the Northern Plains-Rockies should run cooler than surrounding areas due to a fresh snow cover.).”
Traders weren’t terribly impressed with the days futures gains. “I think it held a technical point at $3.50, and traders held on to their long positions, but it was nothing aggressive,” said a New York floor trader.
“The market looks pretty good for the moment and should have some more upside to go. Maybe we will get into the low $3.70s, but I think we are in a technical drift off of a support area.”
Followers of natural gas from an Elliott Wave and Retracement perspective see the market poised to work lower. “Natgas did absolutely nothing last week. Nada. Zilch. Nil. Zip. However, possibly the most important thing that natgas did not do last week was attempt to make a new high,” said Walter Zimmermann, vice president of United ICAP.
“The seasonal rally period for natgas is Labor Day to Thanksgiving, and Thanksgiving is fast approaching. And we still have major, bearish divergence sell signals in both momentum and sentiment. Natgas has met almost all of our pre-season rally upside targets.” Zimmermann suggests traders use protective sell stops for remaining length and producers use these levels to hedge.
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