Physical natural gas continued lower Tuesday as the market grappled with a tsunami-like influx of warmer-than-normal temperatures east of the Rockies and the ongoing need to purge storage gas.

Less than a handful of Northeast points were able to avoid the price slide, adding a couple of cents to just more than a nickel. Futures managed a modest technically inspired rally. At the end of the day April futures had risen 3.0 cents to $2.299 and May had gained 3.5 cents to $2.408. April crude oil added 37 cents to $106.71/bbl.

Nationwide, cash quotes were off an average of about a nickel, but those points squarely in the crosshairs of advancing warmth took the greatest hit. Northern Natural Ventura was off just over a dime and Norther Border Ventura slipped 8 cents.

“Temperature records continue to be shattered across the eastern two-thirds of the nation as the spring-like warmth bulges eastward,” said Dan Depodwin, AccuWeather.com meteorologist. His data show a large area of high pressure stationed near the East Coast continuing to pump warm air northward through the week. With high temperatures reaching into the 60s and 70s, many locations will be 10-20 degrees above normal.

“Residents from Dallas to International Falls, MN, to Boston can put away the winter jackets for the week. Temperatures will soar into the 60s as far north as the U.S.-Canadian border with 70s creeping into the New York City area.

“The only potential downside to the weather this week across the eastern two-thirds of the nation will be some rain showers and thunderstorms that push through the Northeast [Tuesday], and some thunderstorms from Washington, DC, to New York City could produce hail this afternoon.

“In general, places farther north will have the largest departures from normal. For example, the normal high for International Falls, MN, is in the low 30s. High temperatures this week are expected to climb near 60 degrees, almost 30 degrees above average! Even in places across the Plains, temperatures will climb to near-record levels. Kansas City, MO, is forecast to challenge record highs near 80 degrees all week.”

Western markets were active. “We’ve been seeing quite a bit of summer and winter SoCal Border trade today,” a trader said. “It is definitely feeling weaker heading toward [Monday’s] settlements.”

Next-day western prices remained flat or saw small declines as a series of storms and a major league dip in the jet stream was anticipated to send abundant moisture across part of the West through the balance of the week. PG&E citygate, Kingsgate and Stanfield all traded close to flat, and Malin was down a couple of pennies.

In the Northeast power generation was taking up most of the gas load with little need for heating and next-day gas was mostly soft. “Whatever is getting nominated is getting through. Basically the LDC load and heating load is next to nothing,” said a Northeast trader. “That’s why the basis is like 35 cents on Algonquin and Tennessee. On a decent winter day that could be $7.”

Next-day quotes on Algonquin were a penny lower, and Tennessee Zone 5 300 L was flat. Iroquois Waddington added a couple of pennies.

Futures rose on “little short-coverings here and there,” according to a California trader. “Heaven help us if the [futures] market puts up another $1 print and generates another round of put buyers. No one is selling the market at these levels.”

The trader saw a conundrum between an economy that is holding its own “because of cheap natural gas” and a natural gas pricing environment that “keeps going down because every time they drill for crude they find more natural gas and there is nowhere to go with it.

“I think it’s a little bit of each. Economic activity is somewhat OK, but natural gas at this point would have to have huge supply disruptions somewhere along the line [for prices to rise].”

Analysts are looking for a pervasive $1 handle in the cash market by the end of the month. “Although spot price weakness is now appearing more orderly than had been expected last month, it would still appear that next-day pricing will be dropping to below the $2 mark as March proceeds,” said Jim Ritterbusch of Ritterbusch and Associates.

As the differential between spot and futures widens, “we will continue to emphasize the bearish importance of such a development. The large speculative community will continue to be enticed into the short side of the market with prospects of rolling positions forward into unusually large price premiums in the process of enhancing long-term yields. And of course, the larger forward premiums will continue to offer incentive to commercial concerns still needing to protect inventory values or future production.”

Market technicians are studying their charts for signs the market is poised to move either higher or lower. With April having traded Monday so close to a previous low and actually breaking through in Tuesday’s activity, a classic double-bottom formation may be in the making. “Got the expected breakdown from the triangle. Now the issue is whether a double bottom is forming,” said Walter Zimmermann, vice president at United-ICAP.

“A double bottom occurs when bulls, having missed the prior low, take full advance of their second chance and chase prices higher. In bear market rest stops a market fall to a prior low and then just sits there. So the bullish case needs a sharp rally this week,” he said in a weekend note to clients. Zimmerman picks near-term support at $2.230 and $2.085.

With super above-normal temperatures forecast for the next two weeks for major Midwest and eastern energy markets, the question arises if this trend is likely to continue farther into the spring. The short answer is yes, but that may translate to greater demand for electrical generation. The National Weather Service in its outlook for March, April and May says the expectations are for “below-normal mean temperatures for parts of the Pacific Northwest southward along the northern California coast and for southern Alaska. Probabilities of above-normal mean temperatures are enhanced for a large region of the continental United States including much of the southern continental United States from the southwest to the southern Atlantic coast, northward into the central and northern plains and Great Lakes region, as well as the Mid Atlantic states.”

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