Overcoming Mild Weather, Storage Load Boosts Prices
Gas buyers could have been forgiven Monday for modifying a
popular movie's catchphrase and screaming, "Show me the weather!" A
utility buyer reporting "beautiful" conditions outdoors in the
Northeast said it seemed odd that prices could continue to rise in
the face of moderate weather in most major market areas outside the
South. Cash quotes ranged from flat to barely higher at Northeast
citygates to as much as 15 cents up at the PG&E citygate. Most
gains tended to be on either side of a nickel.
A moderate increase in Henry Hub futures was part of the reason
for cash firmness, sources said. And although relatively cool
temperatures dominated in much of the Northeast and Midwest, a few
pockets of heat were beginning to surface again in the
Midcontinent/Midwest, several agreed.
But storage demand was the consensus choice as primary price
booster. Some people are starting to think the industry may not be
able to catch up on injections this year, a marketer said, "but
we're plugging away at it." A Midcontinent producer counted himself
among those who doubt that the year-on-year storage deficit will be
erased. "There is not enough supply to meet current [burn] demand,
let alone refill storage," he said. Midcontinent prices started in
the $2.50s Monday and moved into the low $2.60s "pretty quickly"
largely due to heat and the storage situation, the producer said.
And as long as the Nymex stays up, "so will cash," he added.
The weather is about as bearish as it's going to get and prices
are still strong, "so that really tells you something," a marketer
said. Wednesday afternoon's AGA storage report will be critical, he
said. Injections need to average about 72 Bcf a week for the rest
of the season to get to full storage volumes, the marketer went on,
and the AGA figure is expected to be considerably less than that.
There really aren't any bearish signs on the horizon for this
market, "and with the [most active part of the] hurricane season
coming up." he said, leaving the rest of his thought unspoken.
It was somewhat fitting that PG&E citygates, Friday's
biggest losers due to a high-inventory OFO by the utility, would be
Monday's biggest gainers with the OFO fading into memory.
A western trader was a bit surprised that Permian Basin prices
didn't rise any higher than they did, noting that El Paso's
maintenance outage of its Keystone Mainline Station is requiring
the shut-in of about 400 MMcf/d today and tomorrow.
Another source expects western markets to be subdued for a
while, saying a number of traders were doing multi-day deals Monday
in preparation for the Colorado Oil & Gas Association meeting
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