Natural Gas Intelligence
Midcontinent, East Offset Northeast Weakness; Futures Notch New High

Thursday, November 15, 2012

Overall cash prices added about a nickel on average Wednesday as strength at eastern and other points was able to offset weakness in the Northeast and a steady Midcontinent market. Meanwhile, December futures recorded a 12-month spot contract high on the day at $3.827 before closing out the regular session at $3.760, up 2.1 cents from Tuesday's finish. January was 2.2 cents higher at $3.879. December crude oil rose 94 cents to $86.32/bbl.

New England markets eased as the dynamic of ever-falling temperatures was removed from the market. Expected temperatures were hovering right around seasonal norms. forecast that Boston's Wednesday high of 46 degrees was expected to hold steady Thursday before rising to 48 on Friday. The normal high in Boston this time of year is 52. New Haven, CT's Wednesday maximum of 50 was anticipated to ease to 48 on Thursday and rise to 53 on Friday. The normal high in New Haven is 55.

The National Weather Service in southeast Massachusetts predicted that "lower level moisture will be tough to erode with [a] decent inversion in place... so prospects for clearing are low. [It is a ] Different story across interior where the airmass is much drier and plenty of sunshine is expected outside of southeast New England. Forecast highs are close to ...40s to around 50. Cloudiness over southeast New England is expected to erode Thursday night as ridging builds into skies remain clear elsewhere. Colder nights ahead with lows in the 20s and 30s.

Next-day quotes at Algonquin Citygate dropped 34 cents to $7.37 and deliveries into Iroquois Waddington slipped 21 cents to $5.86. Gas on Tennessee Zone 6 200 L slumped 68 cents to $7.14.

If estimates are correct, Thursday's inventory report from the Energy Information Administration is likely to show storage hovering near 4,000 Bcf. A Reuters poll of 26 traders and analysts showed an average 14 Bcf pull with a range of a draw of 32 Bcf to a build of 9 Bcf. United ICAP predicted a pull of 31 Bcf and industry consultant Bentek Energy is looking for a withdrawal of 29 Bcf.

Last year, 20 Bcf was injected and the five-year average stands at a 17 Bcf increase.

Market technicians see a positive tone to the market but calculate several near-term objectives that have to be met in order to re-establish the upward trend. "Another constructive day for the bulls. However, key resistance has yet to be breached," said Brian LaRose of United ICAP following Tuesday's close. "[We] see only one way to confirm another leg up is still ahead, get back above $3.850 and 3.970. Clear these two levels, and natgas has room up to $4.320-4.380-4.399-4.418, our head and shoulders target [December contract]. Fail to clear resistance, and a larger degree decline is likely to unfold from the October highs."

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