Natural gas cash prices on the national level slipped an average of 2 cents Tuesday as most points across the nation came off by a few pennies with the exception of those in the Rocky Mountains, which remained relatively flat. At the close of futures trading May had managed a gain of 2.3 cents to $4.160 and June added 2.0 cents to $4.188. May crude oil gained a penny to $88.72/bbl.
“We are about out of storage, but it looks like there will be more normal temperatures next week, said a Midwest utility buyer.
Rebuilding supplies is now a top priority. “I would think that prices should stay pretty strong just because everyone is in the same situation we are in and need to store gas,” the buyer said. “Everyone has drained their storage and there isn’t much else to do but buy.”
The buyer said the company was burning about 120,000 Dt/d with the cold weather. “It’s a strong day and we were only planning on doing about 60,000 Dt. April is beginning to look as strong [volumes] as March.”
Cool temperatures don’t seem ready to make room for spring anytime soon. Tom Skilling of the Chicago Weather Center forecast a high of just 48 for the Windy City Wednesday, 11 degrees below normal. “Showers and occasional thunderstorms are increasing and coverage and intensity from the south. The heaviest and most numerous downpours are likely to reach the city and areas north during the afternoon and evening. East to northeast winds 12-24 mph.”
Other cities in the Midwest were expected to stay cool as well. AccuWeather.com forecast that Tuesday’s high of 48 in Minneapolis was expected to fall to 38 Wednesday before climbing back up to 44 on Thursday. The normal high in the Twin Cities this time of year is 58. Omaha’s high reading of 50 Tuesday was forecast to ease to 48 Wednesday before easing further to 44 on Thursday. The seasonal high in Omaha is 64.
Quotes on Northern Natural Ventura fell 3 cents to $4.21, and at Demarcation gas was quoted at $4.25, unchanged. Deliveries on Alliance slipped 6 cents to $4.24, and at the Chicago Citygates next-day deliveries came in at $4.31, 2 pennies higher. Gas on Michcon was seen at $4.47, down a penny.
Not only will the buyer have to tap into a market that doesn’t seem ready to forsake persistent cool temperatures, but he will be competing with buyers to offset nuclear power plant outages. According to NGI’s NRC Power Reactor Status Report, the amount of nuclear capacity offline was just a shade off the year’s highest figure posted Monday.
Tuesday 27,043 MW was offline, just shy of Monday’s 27,243 MW reading. The lost power is due to 33 nuclear plants either offline or producing at less than 100% of full power. As indicated in the report, the 33 nuclear plants’ generation represents a loss of 27% of total U.S. capacity of 98,564 MW generated from 104 facilities. A year ago 26,552 MW was reported offline.
Gulf points were weaker. Quotes at Transco Zone 3 were off a nickel at $4.18, and deliveries to the Henry Hub fell 4 cents to $4.19. Gas on Tennessee 500 L was lower by 4 cents to $4.20, and on Texas Eastern E LA quotes came in at $4.10, down about 9 cents.
West Coast prices were little changed. At the PG&E Citygates, Wednesday packages were seen at $4.24, 3 cents lower, and at the SoCal Border next-day gas was $4.21, 2 cents higher. At the SoCal Citygates, gas was $4.36, about 2 cents higher, and on El Paso S Mainline Wednesday deliveries were up a cent at $4.26.
Futures traders seem circumspect about the market’s next move. Monday “it fell out of bed and [Tuesday] it couldn’t get out of its own way. Last week I thought if we came in higher, we would test some higher numbers, but it seems to be trading sideways now,” said a New York floor trader. “If we get this market rolling above $4.22, we have a chance to test those higher numbers. I think there is scale down buying when it gets down to these lower levels, $4.05 to $4.10.”
Some analysts are coming down with gold fever. With the price of gold now down nearly 30% from its record September 2011 high of $1,920.30/oz to around $1,377, analysts looking for a commodity to be bullish about have turned their focus to natural gas as a new commodity “safe haven.”
In the recent research note, “There are weeks when decades happen,” Goldman Sachs analysts Jeffrey Currie, Damien Courvalin, Max Layton and Stefan Wieler talk about abandoning long gold positions while touting U.S. natural gas to investors.
“Over the previous five years the two highest conviction trades in the commodity complex were being long gold in response to the debasing actions of central banks around the world and short natural gas in response to the shale revolution,” the analysts wrote. “These two trends have now likely reversed and our conviction in these new trends has risen significantly over the past month as we have introduced both short gold and long natural gas trading recommendations.”
The Goldman analysts added that these shifts in trends “represent a significant departure from the past decade” and are interrelated. “The shift in gold represents a more confident economic environment where there is a flicker of light at the end of the tunnel to this period of easy money while the shift in natural gas represents the ability for trend natural gas consumption in the U.S. to near 3.0%. This underscores how the shale revolution has helped shape the improving economic environment in the U.S. — making U.S. natural gas and the U.S. economy the new safe haven.”
Other analysts see mixed fundamentals with a diminishing bullish impact. The “fundamental picture is taking on a more mixed appearance for reasons other than seasonal,” said Jim Ritterbusch of Ritterbusch and Associates. “Although the heating season refuses to end, there appeared to be enough temperature moderation last week to facilitate the first storage injection of the season on Thursday, one that will likely exceed last year’s 21 Bcf build while possibly approaching the five-year average hike of 39 Bcf.
“We will be looking for an increase of 35 Bcf. But, once again, surprises are apt to skew bullish as nonweather related items such as production, industrial demand, imports, etc. are more apt to prove supportive than bearish as seen in recent supply releases. But while we see enough bullish ammunition available to support a rebound back toward [Monday’s] highs near the $4.30 area, we are having much difficulty constructing a scenario that would carry nearby futures to above this expected resistance.”
Market technicians see the bears needing to build their case by further declines. Brian LaRose of United ICAP sees the most bearish case resistance at $4.270-4.305. On Monday, gas “spilled lower from a $4.290 high to a bearish engulfing pattern on the daily candlestick with continuing bearish RSI divergence on the daily chart. What the bears need now is a decisive break below the $4.000 level. Otherwise, we expect the advance will likely continue.”
Even in April, cooler-than-normal weather has become a price-driver. Although below-normal temperatures don’t have the impact they had in February, major Midwest cities are at or below normal, keeping a firm tone to the cash market. The average cash price in Monday’s trading was $4.23, according to figures.
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