Overall cash market prices surged nearly 14 cents on average Monday, nearly outpacing a soaring futures market. Much of the strength was derived from the screen, but weather forecasts in key eastern markets also provided some short term support. Northeast and eastern markets were particularly strong and California markets posted weather-derived gains. Gulf points were also firm. At the close of futures trading November had jumped 16.0 cents to $3.480 and December had added 13.7 cents to $3.752. November crude oil gained 29 cents to $92.48/bbl.
Northeast marketers were pleased with their October index purchases. “We locked in what we thought our customers would be taking on average for the month, and if they didn’t take that average we would be selling that at a premium,” said a Houston-based northeastern marketer. “There wasn’t much of that today [Monday], however,” he admitted. “We actually have a customer base that is taking a little more than their average because of the way their contracts are set up, and we have some customers that are doing daily pricing anyway.”
The marketer said temperatures were pretty mild and most customers were taking what the marketer had purchased for them. “Most customers were right on, at least in the Northeast,” he said.
Quotes on Algonquin Citygate jumped 28 cents to average $3.60, and deliveries to Tennessee Zone 6 200 L were 19 cents higher at $3.56. Parcels into Iroquois Waddington added 29 cents to $3.67. At Tetco M-3 next day deliveries averaged 20 cents higher at $3.39 and Tuesday gas on Dominion was reported 11 cents higher at $3.16. Gas into New York on Transco Zone 6 rose by 18 cents to $3.37.
Temperatures for Tuesday and for the next few days may be mild, but they are above seasonal norms. Forecaster Wunderground.com said Monday’s high in Boston of 70 would rise to 75 by Tuesday and hit 72 on Wednesday. The normal high in Boston this time of year is 67. In New York the high Monday of 75 was predicted to ease to 70 on Tuesday before rising to 79 on Wednesday. The seasonal high in New York this time of the year is 69.
“[W]eak high pressure will build over the area late [Monday]…and then weaken on Tuesday as an upper level disturbance moves across,” said the National Weather Service in New York City. “A warm front will slowly approach Tuesday night and lift to the north Wednesday…followed by a cold front pushing through late Wednesday night into Thursday morning. Weak high pressure will then build in to the Southwest through Friday. A series of weak cold fronts will cross the area into Sunday…then high pressure will build in for early next week.”
Mild temperatures may have been in play in the East, but California points soared as something of a mini-heat wave kept buyers on edge. “As temperatures generally head down across the nation this week, the Southwest will buck the trend and continue warming up,” said Bill Deger, AccuWeather.com meteorologist. “The 90s and 100s that were felt in some areas this weekend will be commonplace early this week across many areas, most notably in California where the warmth will be nearly unprecedented for this time of the year. In Fresno, it will be the hottest start to October in 25 years.”
He attributed the warmth to an “unusually strong high pressure centered over the Great Basin reinforc[ing] the offshore flow that has been driving the southwestern warmth over the past several weeks. Since the beginning of September, cities like San Diego, Los Angeles and Las Vegas have averaged several degrees above normal. Through Tuesday, afternoon temperatures in those same locations could run as high as 15 degrees above normal. This will be more than enough to challenge some long-standing records.”
Tuesday gas at Malin gained 8 cents to average $3.11, but prices at the PG&E Citygate surged 19 cents to $3.89. Deliveries to SoCal Citygate were up 17 cents to $3.73 and Tuesday parcels into the SoCal border fetched $3.61, up by 16 cents also. On El Paso S Mainline next-day gas came in at $3.65, up 18 cents.
Not to be outdone the Gulf put up gains almost as strong as those of California. Columbia Gulf Mainline was 12 cents higher to average $3.13 and deliveries on ANR SE rose 12 cents to $3.11. At the Henry Hub Tuesday gas was 11 cents up from Friday deals done for Monday at $3.19 and gas on Tennessee 500 L rose by 13 cents to $3.18. At Tetco E LA gas added 13 cents to $3.13 and Transco Zone 3 was 14 cents higher also at $3.17.
Futures traders see additional gains. “We’ll probably get to $3.60, and I’m surprised it rallied this much,” said a New York floor trader. “It looks like some people got short in the $3.20 to $3.30 area, and now we are seeing some covering at these [higher] levels. I think the market will run out of steam at the $3.60 level.”
With the futures advance as strong and uni-directional as it has been, picking a support area becomes difficult. “We really haven’t tested the downside yet. I’ll have to look at some charts,” he said.
Analysts see factors at work continuing to support the near-term bullish case. “As we attempt to construct a trading theme for this new month of October, we will continue to emphasize the importance of dynamic over static factors,” said Jim Ritterbusch of Ritterbusch and Associates in a weekend report to clients. “A record storage level is a static variable that has been well discounted into the pricing structure. Contrastingly, we see several dynamic forces as capable of keeping this short-term bullish run alive possibly through this week. Besides the expected uplift in temperature related demand and the further narrowing in the year over year surplus, we feel that production slippage needs to be added to the list of subsurface bullish elements.”
Forecaster MDA Information Systems predicted a big change in longer-term weather patterns. In its morning six- to 10-day outlook it predicted a large ridge of below-normal temperatures centered over Iowa but extending as far east as Pittsburgh and as far west as Denver. “Colder changes were made across the Central U.S., increasing the coverage and intensity of belows and much belows. The blocking pattern setting up over western Canada/Alaska will trigger much of the downstream cold. Included should be some of the coldest air so far this season across the core of the Midwest.”
The forecaster said it saw risks to the forecast as trending cooler and said “the Southeast will initially resist the cool air but should also trend toward below normal by later in the period. A closed upper low is expected to arrive and remain along the California coast within this time frame as well, cooling this region.”
In the near term, temperatures across key Midwest markets are expected to be normal. AccuWeather.com forecast highs in Chicago through Thursday would be about 70 with the highs on Saturday falling to 54. The normal high in Chicago at this time of year is 69.
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