Physical natural gas prices continued lower and on average lost about 5.5 cents in Friday trading for weekend and Monday deliveries. A few points were unchanged, but all other pricing points failed to make it out of the loss column. Mild weather projections prompted downward movement at not only West Coast points but other locations servicing westbound gas to California. Eastern gas fell as well as monthly basis differentials slid.
At the close of futures trading May had risen 2 cents to $1.927 after reaching yet another new 10-year low at $1.902 on very light volume. June gained 2 cents also to $2.015, and May crude oil added 78 cents to $103.05/bbl.
What had been a series of storms and cool weather for the West Coast was forecast to give way to mild and sunny weather over the weekend and during the coming week. Monday gas prices rattled lower. “A pattern change is on deck for the West that will feature warmth and sunshine on a regular basis for areas that have seen little in recent weeks,” said AccuWeather.com meteorologist Alex Sosnowski.
“A dip in the jet stream, has been situated over the Northwest during the early spring [and] the pattern brought frequent strong storms, and rounds of late-season snow to the high country.
“In the past week or so the jet took on more of a west-to-east pattern across the northern United States, allowing weaker, faster-moving storms.” Now the jet stream is being flung well to the north into western Canada. “With this setup, storms will be forced away from the western U.S, allowing more sunshine and temperatures generally much warmer than average,” he said.
Quotes on El Paso S Mainline fell close to a dime as did Monday deliveries to SoCal Border points. Socal Citygate suffered the biggest loss, getting hit with more than a dime loss.
Farther north prices also eased. Gas at the PG&E Citygate shed more than a nickel, and gas at Malin fell close to a dime.
AccuWeather.com forecast that the high in Los Angeles Friday of 83 would drop to 72 by Monday. The normal high in Los Angeles this time of year is 72.
Not only was Monday gas at Eastern points weaker but monthly basis differentials weakened as well. “Algonquin and [Transco] Z6 have both sold off. Last week Algonquin Citygates was 29 to 31 cents over Nymex, but now it’s 25 cents bid at 26 cents. Z6 is down to 18 cents over,” an eastern marketer said.
“I think this is because there is not a whole lot of weather, [Henry] gas is under $2; there’s not a whole lot of action, and anyone who has length wants to get out of it probably.”
Monday deliveries at Algonquin Citygate points fell close to a nickel, and gas at Iroquois Waddington fell a couple of pennies. Deliveries on Tennessee Gas Pipeline Zone 6 200 L were down by a couple of pennies as well.
Gulf points also weakened. Monday parcels on Tennessee 500 L slipped about 4 cents and gas at the Henry Hub was lower by a few cents. Gas on Texas Eastern E LA shed more than a nickel.
Top analysts see $1.85 spot futures by mid-week prior to the storage report for April 20. “This price consolidation just above the $1.90 level could continue through Monday. However, we still look for a decline down to our targeted $1.85 level by mid week, at which time we will be suggesting acceptance of additional profits ahead of another storage report,” said Jim Ritterbusch of Ritterbusch and Associates in closing comments to clients. “While we will continue to note that a record supply surplus of more than 900 Bcf has been duly discounted into the pricing structure, we will also indicate that the production dynamic remains well entrenched as a bearish price driver. In other words, the market is still demanding a much larger output response to 11-year low pricing than has been seen thus far.”
For the time being the market seems to have acknowledged but not fully priced in what is likely to be a game of musical chairs for storage gas toward the end of the injection season. “With the weather factor diminished in importance for the time being, the market is forced to focus on a record supply per date that will likely be testing storage limits just a few months down the road,” he said.
At present the risk-reward environment does not favor additional new selling. “The spread curve remains steady but we will continue to suggest that much of this strength reflects rolling of speculative short positions and should not be interpreted as a bullish portent for flat price. All in all, we are maintaining a bearish view but would caution against fresh shorts at current levels given proximity to our previously stated downside target of $1.85,” Ritterbusch said.
The good news for weather bulls is that normal to below-normal temperatures are expected along the populous coasts, but the bad news is that above- to much above-normal temperatures are forecast for the interior. WSI Corp. of Andover, MA, in its six- to 10-day outlook expects “Temperatures of 8-11 degrees above normal…over portions of the north-central U.S. Near- to below-normal readings are anticipated now in the Northeast.”
This is a change from Thursday’s forecast in that it “is cooler in the Midwest and Northeast while somewhat warmer from the Great Basin through Deep South-Southeast. “Temperatures may run warmer than forecast over the interior western and south central U.S. while cooler along both coasts, especially if the latest European model verifies,” the forecaster said. “Most models have at least trended slower to eject a trough from the Atlantic Seaboard while indicating an amplified one along the West Coast as well early in the period.”
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