Mixed pricing returned to the market Wednesday. Western points generally ranged from flat to down nearly 30 cents, although Sumas and intra-Alberta managed small gains. The East had a few declines, mostly in South Texas, the Midcontinent and Northeast, amid overall numbers ranging from flat to a little more than a dime higher.
Cooling demand continued to erode quickly in the key Midwest and Northeast market areas, with upper New England not expected to get above the 60s Thursday. Moderate weather is dominating most of the West, leaving the South and desert Southwest as the only remaining repositories of significant air conditioning demand.
The combination of up and down price movement might have been seen as a sign of impending reversal of this week's cash bullishness so far. But that perception was complicated by the screen's recording a 21.3-cent gain Wednesday after having retreated a few pennies Tuesday. Once again the oil market was a major influence on natural gas futures as crude traders shrugged off an OPEC announcement of increased production quotas as essentially meaningless and instead focused on a government report of a second straight weekly drop in crude oil stockpiles when they had been expecting flat inventory. Crude for July delivery soared as high as $56.70/bbl before giving more than a dollar back, settling up 57 cents to $55.57.
With so much cooling load being lost in the Northeast, a marketer in the region felt confident in predicting softer prices Thursday. But a Gulf Coast producer saw it as a hard call on Thursday's price direction, noting that the screen's 20-cents-plus increase Wednesday would be pitted against declining weather-related demand in northern market areas.
Consensus expectations of a storage injection in the 80s Bcf, to be reported Thursday morning for the week ending June 10, were considered somewhat bullish in light of comparisons with 95 Bcf builds a year ago and in the five-year average. However, the producer expressed surprise that expectations were that high because of how much hotter the overall weather picture had gotten last week. She noted that "it's still very hot" in the South, with basically no slippage in cooling load there.
A marketer commented that power generation purchases of gas in the Northeast were dropping noticeably Wednesday as the market area cooled off quickly after a spell of heat. He said temperatures were falling "anywhere from 15 to 30 degrees" in the region's various cities over the Tuesday-Thursday period. He expected Northeast citygates to ignore prior-day futures support and decline Thursday, saying that with air conditioning demand way down, there was little else to boost prices.
Similarly, temperatures were getting much cooler in the Midwest, "and we welcome it," a marketer said. But she was dismayed to see futures going much higher again. At least crude oil pulled back a lot after it looked like it was aboard a skyrocket to new record heights, she remarked.
A Calgary-based producer was also at a loss to figure out "these futures run-ups" while he perceived most market factors as turning bearish. He reported that the Malin market was "in the tank compared to intra-Alberta," so there hasn't been a lot of throughput lately on TransCanada's GTN-Northwest system to the Northern California border, he said. With the Pacific Northwest in a low-demand period, Sumas also was pretty weak and provided very little coverage of transport costs from Westcoast Station 2 in British Columbia, the producer continued.
He expects that situation to be exacerbated somewhat as Westcoast's McMahon Plant begins its annual turnaround Thursday, cutting normal volumes to 60% until Tuesday when plant capacity goes to zero for about three weeks. That should take transport to Sumas "even further out of the money" as the reduction in available supply helps raise Station 2 prices close to parity with intra-Alberta numbers without any corresponding increase at Sumas likely, he said.
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