Natural gas cash prices nationally added on average a nickel in Tuesday’s trading as traders are beginning to see the dynamic of warm weather generating additional power generation requirements from gas-fired plants.

Northeast and East natural gas locations followed the lead of higher power prices, and points in the Midcontinent — a region that is reeling from a powerful tornado strike Monday — put in a mixed day.

At the close of futures trading, June had added 10.2 cents to $4.192 and July was higher by 9.8 cents to $4.239. July crude oil skidded 75 cents to $96.18/bbl.

“Tennessee is getting allocated so that should keep prices [Tennessee Zone 6 200 L] nice and firm,” said a Houston-based northeast marketer.

In spite of what looks like a mild temperature outlook, power generators were buying next-day deliveries to fire their plants. “The power generators are buying the gas because their plants are getting called on. They don’t say if it is for peak shaving or what.

“We haven’t seen any big uptick on Tennessee. People are still trying to buy it under $5 and sell over $5 for intraday. For tomorrow [Wednesday] it is trading around the mid $4.80s. Guys will put an offer out there and see if someone comes along and hits it. It looks to me as though the power generators will continue buying and keep a firm bid under the market.”

For the moment, temperature forecasts for the Northeast appear able to keep the gas and power markets well bid. Wunderground.com predicted that the high in Boston Tuesday of 70 would rise to 79 Wednesday and ease to 75 by Thursday. The normal high in Boston this time of year is 68. New York City’s Tuesday high of 84 was anticipated to ease to 81 Wednesday and 73 Thursday, one degree higher than the seasonal norm.

IntercontinentalExchange reported strong next-day power pricing at eastern locations. Next-day power into the New York Independent System Operator’s Zone G (eastern New York) delivery point rose $11.60 to $59.10/MWh, and power delivered to the New England Power Pool’s Massachusetts Hub for Wednesday added $4.15 to $50.80/MWh. Power into the PJM Western Hub for next-day delivery gained $6.18 to $79.95/MWh.

Gas for Wednesday delivery into the Algonquin Citygates added a hefty 18 cents to $4.65, and deliveries to Iroquois Waddington gained about 5 cents to $4.66. Packages on Tennessee Zone 6 200 L added 18 cents to $4.84.

Gas on Dominion was seen 5 cents higher at $4.20, and deliveries to Tetco M-3 gained about 6 cents to $4.33. Gas bound for New York City on Transco Zone 6 added a dime to $4.45.

The devastation caused by a tornado in Oklahoma Monday impacted the Southern Star system and caused a force majeure event. The company said, “a tornado that touched down in Oklahoma County, OK, has caused damage and will require Southern Star to isolate most of Line Segment 340.” It added that five points would be unavailable until further notice, among them Oklahoma Natural Gas into Oklahoma City.

Midcontinent points were mixed in trading for Wednesday delivery. Gas on Southern Star was seen down 2 cents at $3.99, but NGPL Midcontinent Pool was quoted at $4.02, up 3 cents. On Oklahoma Gas Transmission Wednesday gas came in at $3.98, down 5 cents, and deliveries on NGPL Amarillo were quoted at $4.06, up a penny. Deliveries on Panhandle added 2 cents to $3.90.

A technical trader in Oklahoma City said with Tuesday’s advance, prices had now advanced over his trend line and recorded a buy signal. “The market [July contract] crossed the line at $4.22, and it looks like the market is trying to break out. That would get me out of a short position and holding $4.22 would generate the buy signal. I would use a close stop of a close under $4.20 to manage the risk,” he said.

Top traders are looking for one more push higher before the market digests what is expected to be a hefty storage report on Thursday. “Further contraction in the year-over-year deficit would appear likely with this week’s figure exceeding last year’s 75 Bcf injection by a significant margin. But the market will be more focused on a couple of EIA reports beyond this week that will be affected by an uptick in [power generation] demand due to broad-based cooling needs,” said Jim Ritterbusch of Ritterbusch and Associates in a morning note to clients.

“Price impact off of this upcoming hot spell is being accentuated by the fact that it is being widely interpreted as a portent of a warmer-than-normal summer that could potentially slow injections within a storage environment that is already running almost 700 Bcf below a year ago. But while a reduction in this deficit is expected by month’s end, the year over year shortfall at the beginning of June could still be exceeding 625 Bcf. Although this will remain as a supportive force, especially if the summer temperature trends prove above normal, it won’t necessarily preclude occasional sharp price sell-offs since supply won’t be far removed from average.”

Ritterbusch sees the groundwork in place for volatile trading. “Although the weather isn’t usually a major driver of price at this time of the year, the magnitude of the upcoming heat and the fact that noncommercial traders are still significantly net short in this market is tending to up the possibilities of occasional price up spikes and vicious reversals such as that seen since last Thursday.”

WSI Corp. in its 11- to 15-day outlook showed a ridge of above-normal temperatures running from West Virginia and Ohio to Indiana and portions of Missouri. “[Tuesday’s] forecast continues to trend warmer across the eastern two thirds of the nation,” it said.

Tom Saal, vice president at INTL FC Stone in Miami, in his work with Market Profile was looking for the market to test Monday’s value area at $4.148 to $4.122 before moving on and testing $4.014 to $3.932. “Maybe” the market will test $4.427 to $4.361, he said in a Tuesday morning note to clients.

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