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Most Points Rebound as Cooling Load Jumps

More growth of cooling load, with an especially dramatic boost due Friday in the lower Northeast, along with continuing prior-day futures support rallied cash prices at most points Thursday. The exceptions were flat to about a dime lower quotes at several locations, primarily in the West and Midcontinent.

The majority of upticks ranged from 2-3 cents to about 60 cents and tended to be strongest in the Northeast and Gulf Coast.

The Energy Information Administration (EIA) slightly exceeded consensus expectations in the low 100s Bcf when it reported a storage injection of 105 Bcf for the week ending May 30. Although the build was nominally bearish, Nymex traders pushed July natural gas futures 14 cents higher while a $5-plus spike in the crude contract was occurring nearby.

One source suggested that the EIA's report indicates that besides the buildup in cooling load and futures advances, heavy storage injection purchases are another factor in the recent strength of the cash market.

High temperatures around 90 degrees or more have been common from the Southeast through the Southwest and in the Mid-Atlantic and Midcontinent for a while now, and much of the lower Northeast will join those areas in getting a jolt of hot weather Friday. New York City illustrates what a radical change is in store. As of Thursday the Big Apple was still relatively cool with a high around 72, according to Madison, WI-based Weather Central, but Friday the city will peak about 20 degrees higher in the low 90s.

With the exception of areas near the Canadian border, the Midwest is also seeing a run-up in air conditioning use. Highs on either side of 90 are forecast for Friday in much of the region.

Outside the Canadian border areas, the upper half of the West is where most of the remaining mild to cool weather is occurring, and that was reflected the regional market's mix of small gains and small losses. Even the desert Southwest is only reaching the mid to upper 90s currently, while inland California is peaking around 80 or so. The result was losses of a nickel to a dime in the San Juan Basin.

Florida Gas Zones 2 and 3, which had essentially ignored the continuation of an Overage Alert Day (OAD) by Florida Gas Transmission by falling about a nickel Wednesday, responded strongly when the OAD was renewed for its eighth straight day Thursday. Zone 3 saw the day's largest increase while Zone 2 was up about 30 cents and the Florida citygate rose about half a dollar.

A Gulf Coat producer said his company was getting a lot of calls for gas from power generation customers in the New York City and intrastate Texas markets. That was hardly a surprise since both Houston and the Big Apple were expected to see highs in the low 90s Friday. The NYC load will last at least through the weekend, "while it's looking like the start of a long, very hot summer" for Texas, he said.

With the heavy cooling load that has built up expected to continue through next week, the producer said he expects further cash firmness Friday. However, the decline of industrial demand that accompanies a weekend might tend to limit any new price increases, he added. He was not aware of any significant transportation issues currently.

There's not much talk about the basis blowout going on in the Rockies, said a producer in the region. He figured that was largely because "absolute prices are so good, no one is complaining." He has been charting the basis spread between CIG and Henry Hub and said the differential of about $4.16 Thursday was "hard to believe -- a 'post-REX' high."

The producer also noted that it's "been a very mild spring here in the Rockies, and with it being so hot in Texas, the weather differences might have a lot to do with the basis getting so wide, and of course, Independence Hub being down for so long has considerably reduced supply into Henry Hub. Ditto for the big drop in LNG" deliveries.

Friday is often a weak day for gas prices in the Rockies, he said, "so the differential might go even higher tomorrow." But the gap may begin to narrow again with Independence Hub coming back on-line and some more LNG due later this month in the Gulf Coast, he said, adding, "Henry Hub is going to be seeing a lot more gas in the near term."

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