General Flatness Belied by Late Price Drops
Enough gas got traded early Thursday at prices within a penny or
two of flat that late weakness reported at many points failed to
drag down averages from Wednesday. However, the late downturns were
taken as a harbinger of continued softening today, especially with
the market subject to the normal drop in weekend demand. The
market felt kind of juiced up Wednesday but was losing its steam
Thursday, according to a Southwest trader. He saw "some real
softness" at the end in Permian Basin.
Sources again agreed that the screen was the major influence on
the cash market. The early Nymex run-up to as high as $2.45 didn't
have much impact, one said, but cash prices did tag along with the
screen later when it headed south. But a western trader said he is
currently seeing more reluctance on the bid side than the offer
side, and he thinks that means fundamentals are starting to
"inexorably assert their proper place in the market."
The reason cash is trading at such a discount to the July
futures screen (at one point Thursday Henry Hub was 7 cents under
the July print) is because a number of Northeast utilities are
taking advantage of higher (above-index) swing prices by selling
their baseload supplies, according to a Gulf Coast marketer. Since
there isn't enough demand to soak up the extra gas being offered,
supplies are getting backed up into the field, where they're not
needed either, he said. Relatively mild weather and high nuclear
power generation capacity is responsible for that, he concluded.
Chicago citygates were a notable exception to the late falling
trend. A marketer reported Chicago quotes in the low $2.30s early
but getting up to $2.37 at the end of the day, with most deals done
at $2.35-36. Another trader said a couple of Gulf Coast pipes
reflected the general trend for a while by starting near their
highs and then going lower, but then got squeezed higher again late
by tightening supplies. A Southeast trader said action is getting
hard to come by on Florida Gas Transmission. He had no quotes to
report for Zones 1 and 2 and only one in the high $2.30s-done
early-for Zone 3. "It's just been real sleepy down there [in
Florida market area]. You know when FP&L [Florida Power &
Light] is selling any kind of gas imaginable into the market, there
are few buyers to be found." He predicted a change next week,
though, as temperatures in the high 80s and low 90s are expected to
raise area market demand.
One source pointed out that with another couple of AGA storage
reports like Wednesday's, the year-on-year surplus that had seemed
so gigantic at the start of injection season "will be out of here."
That's when the gas deliverability problem that was the subject of
much discussion in recent months will start hitting home with more
traders, he said. However, a producer wasn't so sure, saying there
are still non-believers in the deliverability "problem."
Though insignificant to Gulf of Mexico production, the first two
"events" of the fledgling 1999 Atlantic hurricane season have
occurred. The National Hurricane Center Thursday reported two
tropical waves-one several hundred miles south-southwest of the
Cape Verde Islands near Africa's west coast and the other several
hundred miles east of the northern coast of South America. However,
neither system was expected to develop.
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