Overall, cash prices fell 3 cents Friday in a broad retreat as only a handful of points made it to the positive side of the trading ledger. Offsetting the pervasive selling was the Northeast, which scored double-digit gains. Eastern locations were mixed, but the Rockies and major market trading points fell hard. At the close of futures trading, July had fallen 10.6 cents to $3.771 and August was down 10.6 cents as well to $3.793. August crude oil continued its losing ways, giving up $1.45 to $93.69/bbl.
A Rocky Mountain producer was not optimistic that prices could gain much, if any, support from near-term weather forecasts. “People are talking a little hot weather next week; big deal. If it’s in the Midwest, it doesn’t matter. Last June, the combined gas for power use in Illinois, Indiana, Michigan and Ohio was all of 2 Bcf/d. Peanuts. They are all on coal and nuclear,” a Denver producer said.
“Last year, Texas used 5.3 Bcf/d average for last June, and I think Florida was around 3.4 Bcf/d. The weather maps I’ve seen say it is going to be normal to below normal in Texas and Florida. New York last year used 1.6 Bcf/d. These guys that are bullish on natural gas because of heat in the Midwest are incorrect.
“As long as the storage deficit keeps dropping, price rallies are going to be short-lived. You get all these counter trends and ripples on the screen because of a weather forecast or a pipeline explosion, but when the storage deficit comes down, so do prices.”
Quotes on CIG for weekend and Monday deliveries fell 8 cents to $3.52 and gas on Northwest Pipeline Wyoming shed 7 cents to $3.53. At Opal deliveries were off 8 cents to $3.56, and gas on El Paso San Juan fell 7 cents to $3.58. Packages on Questar dropped 5 cents to $3.52.
At New England points, warm temperatures prompted a healthy jump in weekend and Monday prices. Forecaster AccuWeather.com said Friday’s high in Boston of 85 would slip to 84 Saturday but rise to 90 by Monday. The normal high in Boston this time of year is 78. In Hartford, CT, Friday’s high of 84 was expected to ease to 83 on Saturday but jump to 93 on Monday. The seasonal high in Hartford is 81. New Haven, CT’s 81 degree reading Friday was predicted to ease to 71 on Saturday before climbing to 77 Monday. The normal high in New Haven is 79.
Quotes at the Algonquin Citygates for the weekend through Monday rose 49 cents to $4.43, and gas on Tennessee Zone 6 200 L added 43 cents to $4.38. At Iroquois Waddington gas was seen at $4.21, unchanged.
Farther south, gas was seen mixed. Weekend and Monday gas on Dominion fell 10 cents to $3.51, and gas on Tetco M-3 was unchanged at $3.86. Gas bound for New York City on Transco Zone 6 gained a penny to $3.91.
Gas at other market centers was lower. Quotes for the weekend and Monday at the Chicago Citygates fell 7 cents to $3.87, and gas at the Henry Hub shed 5 cents to $3.85. On Panhandle Eastern, packages came in at $3.48, down 7 cents, and at PG&E Citygates gas for weekend and Monday delivery fell 9 cents to $3.85.
Futures traders see the recent declines in prices due as much to a continuation of ongoing trends as to the recent wave of selling engulfing all commodities. “It appeared to us when it broke back under $4 that you had a correction going on, you’ve had a couple of bearish reports, the weather hasn’t been doing anything spectacular, and all of these factors conspired to bring prices lower. It was headed lower anyway, but I don’t think this [recent selling] hurt,” said Elaine Levin, principal with Powerhouse, a Washington, DC-based trading and risk management firm.
“Going back under $4 as we are going into summer for some buyers who had their hands in their pockets, was a wake up call. They are now using this dip as a buy. I have seen that from the ‘buy’ side of our books,” she said.
Natural gas continues to suffer from recent declines in coal prices. At the end of May, July Central Appalachian coal futures settled at $61.80/ton ($2.69/MMBtu), but Friday July coal finished at $54.18/ton or $2.36/MMBtu, a 14% decline.
Analysts see fluctuating weather and temperature patterns, “but at the end of the day, we still see [electric generation] demand as being on the upswing and contributing to some downsized storage injections within the EIA reports to be issued during the first half of July. In other words, the dynamic of the contraction in the supply deficit that weighed on values during the first half of this month has been neutralized or possibly reversed by this week’s updates to the temperature forecasts,” said Jim Ritterbusch of Ritterbusch in a Friday morning note to clients.
Ritterbusch is short term bullish, but longer term bearish. “Our bullish view over the very short-term period that stretches to about month’s end remains largely predicated on warmer temperature views that were reinforced by NOAA’s longer-term summer forecast. And while there is still no major storm event on the horizon, we feel that the first significant development will receive an exaggerated response at this early stage of the hurricane season. But as we leave open the likelihood of a brief return to a $4 handle, somewhere between $4.00-4.11, we will also reiterate our plans to re-establish bearish trading strategies at the higher levels. While conceding that our longer-term bearish views could easily be derailed by a hot summer or active storm season, we are viewing most other items as tilted in a bearish direction.”
Addison Armstrong of Tradition Energy said, “gas prices will likely find support in the coming days from weather forecasts that are calling for hot weather and increased cooling needs across the Midwest and northeast in the next five-days. Forecasts for Texas and the Southeast are little changed from [Thursday], with normal to below-normal temperatures expected in the coming weeks.”
WSI Corp. in its morning six- to 10-day outlook sees only nominal changes. “[Friday’s] forecast is slightly warmer than the previous outlook west of the Rockies, but there are few notable changes.” It added that model agreement was good and “temperatures from the western U.S. into portions of the Deep South may still run warmer than forecast under a strong subtropical ridge. The Midwest to Northeast could also trend to the warmer side during mid-late next week prior to the arrival of a deepening trough.”
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