Physical natural gas prices for Wednesday delivery advanced on average another 11 cents Tuesday as continued forecasts for well above normal temperatures along the Eastern Seaboard, combined with the organization of an area of low pressure over the western Caribbean Sea, maintained upward pressure on next-day pricing. With few exceptions, all points were up by a dime or more, and some locations added close to a quarter.
At the close of futures trading, November was up by 4.9 cents to $3.609 and December added 3.6 cents to $3.765. November crude oil slipped 29 cents to $102.04/bbl.
Northeast and East points posted strong gains as weather forecasts predicted high temperatures Wednesday as much as 15 degrees above normal. Forecaster Wunderground.com predicted Tuesday’s high in Boston of 73 would rise to 82 Wednesday before dropping to 77 on Thursday. The seasonal high in Boston is 67. New York City’s Tuesday high of 81 was expected to hold at 81 Wednesday before slipping to 75 Thursday. The normal early October high in New York is 69. Philadelphia’s high Tuesday of 81 was anticipated to reach 84 Wednesday before easing to 79 Thursday. The normal high in Philadelphia this time of year is 69.
Wunderground.com meteorologist Kari Kiefer said, “a high-pressure system will set up over the Carolinas, which will lead to cool, dry conditions along the majority of the East Coast. The exception to that will be parts of the Northeast, which may experience wet weather due to a low-pressure system lingering off of the New England coast. Rain will likely impact the Great Lakes and neighboring regions through Tuesday.”
Gas for Wednesday delivery into Algonquin Citygates rose by 7 cents to $3.65, and gas into Iroquois Waddington added a stout 24 cents to $3.96. Deliveries on Tennessee Zone 6 200 L rose by 5 cents to $3.66.
On Dominion, gas was quoted 7 cents higher at $3.37, and at Tetco M-3 Wednesday deliveries came in 10 cents higher at $3.58. Gas bound for New York City on Transco Zone 6 gained 7 cents to $3.72.
West Coast deliveries were also firm as stout California next-day power provided a solid footing for higher gas prices. At Malin, next-day deliveries rose by 13 cents to $3.55, and deliveries to the PG&E Citygate gained 8 cents to $3.92. Packages at SoCal Citygates added 7 cents to $3.73, and at the SoCal Border Wednesday gas was seen at $3.62, up 10 cents. Deliveries on El Paso S Mainline came in at $3.63, up 7 cents.
IntercontinentalExchange reported gains, albeit modest ones, in next-day power pricing in California and nearby points. Peak power Wednesday at SP-15 gained 85 cents to $42.09/MWh, and next-day peak power at NP-15 rose by 91 cents to $40.95/MWh. At COB, Wednesday peak power was $1.78 higher at $33.09/MWh, and at Palo Verde next-day peak power was up $1.25 at $35.08/MWh.
Analysts at CME Group said November futures posted a higher high than Monday during the initial morning hours and suggested “that some of the early lift in prices came with a growing low-pressure system in the Western Caribbean that poses a risk to Gulf of Mexico natural gas operations. Some traders said the natural gas market seemed to take [Monday’s] EIA monthly production report in stride, which showed another record level of production at 74.5 Bcf per day in July.”
According to the National Hurricane Center, the weather system currently over the western Caribbean has a 50% chance of becoming a tropical cyclone over the next five days as it enters the southern Gulf of Mexico, putting it on track to pass over offshore oil and gas operations with increased strength later this week.
Others see a number of factors in the mix right now impacting prices. “[Gas prices], after sliding to a one-month low at $3.402 last week have since rebounded back above $3.50 and again settled into sideways trading, as traders ponder limited seasonal demand in the coming weeks and near record production levels of gas against the start of winter heating season and expectations for increasing industrial demand during the fourth quarter of this year,” said Addison Armstrong of Tradition Energy in a Tuesday morning report to clients.
A report by the Energy Information Administration (EIA) Monday showing continued increases in production had little market impact, for now, but the totality of winter weather is the major market unknown at present and is enough to keep a bid under the market. The report said Lower 48 output in July was 74.52 Bcf/d, up from 72.71 Bcf/d in July 2012, and the U.S. total hit 82.32 Bcf in July, compared with 79.38 Bcf/d in July 2012 (seeDaily GPI, Oct. 1).
Analysts see the market standing tall in the face of otherwise bearish fundamental data, at least for now. “This market is exhibiting surprising resiliency in the face of what would appear to be continued bearish fundamentals that were reinforced [Monday] by the EIA’s indication that production had achieved a record pace during July,” said Jim Ritterbusch of Ritterbusch and Associates.
“Although output slipped last month, we still see a return to a record pace that will be boosting supply through the remaining four to six weeks of this storage injection cycle. Last week’s unexpected contraction in the year over year supply deficit will almost certainly be sustained with Thursday’s data. Given last week’s sharply downsized [power generation] demand for either heating or cooling purposes, we expect an unusually strong storage increase this week that could narrow the year over year deficit by another 20-25 Bcf.”
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