Other than being another reminder that the start of the Atlantic hurricane season is just around the corner, development of the year's first tropical depression Thursday was a total nonevent for the gas market. The news came well after cash traders had finished their deals; July futures had already been soaring in response to a modestly bullish storage report; and the system is not expected to approach land anywhere.
Instead, few points ventured more than a nickel either higher or lower from unchanged, and flat quotes were common. Futures guidance from a day earlier was neutral, but a forecast mix of growing heat in some regions going into the weekend while others remain mild to cool squelched Wednesday's gains at virtually all points while keeping significant softness from taking over.
Gains and losses were approximately evenly divided as quotes ranged from flat to up a little more than a dime to down nearly 20 cents. Because of the first-of-month transition occurring on Monday, Thursday's trading was for flows through Sunday. Monday-only deals will be done Friday.
The inclusion of two weekend days likely was a factor in Thursday's modest losses at a number of points.
Through mid-Thursday it had appeared that the 2009 Atlantic hurricane season would begin Monday without any premature storms showing up. However, the National Hurricane Center (NHC) said Tropical Depression One (TD1) had formed off the Mid-Atlantic coast and initially said it was expected to become Tropical Storm Ana. However, in its second TD1 advisory that afternoon the agency merely said the system "could become a tropical storm tonight or Friday."
AccuWeather.com Senior Meteorologist John Kocet commented Thursday afternoon, "All signs indicate that the system is of positively no concern to the United States. Of far greater concern at this hour are the big thunderstorms building over the eastern states that can unleash torrents of rain and cause flash floods." NHC substantiated Kocet's judgment of TD1 being no threat to the nation, much less Gulf of Mexico production interests, with map projections showing the storm moving in a northeasterly direction and remaining well to sea as it approaches the North Atlantic off Eastern Canada.
Tropical Storm Arthur just barely missed getting an early jump on the season last year by developing June 1, 2008 in the western Caribbean Sea and quickly moving ashore over Mexico's Yucatan Peninsula, where it was downgraded to a tropical depression the next day. But in 2007, although it only reached subtropical storm status, Andrea's formation on May 9 that year off the South Atlantic coast was the first named storm in May since 1981, according to NHC archives (see Daily GPI, June 3, 2008; May 10, 2007).
In reporting a 106 Bcf storage injection for the week ending May 22, the Energy Information Administration came in below consensus expectations that were mostly in the 110-115 Bcf range. Although the build still exceeded comparable year-ago and five-year average additions, Nymex traders took the news as modestly bullish and sent the new prompt-month July futures contract 31.9 cents higher (see related story).
As one might expect, falling prices tend to be accompanied by falling volumes, but it's not necessarily so. IntercontinentalExchange (ICE) indicated this Thursday, saying trading at Transco Zone 6-New York on its electronic platform had risen by 3,800 MMBtu from Wednesday's level of 111,000 MMBtu but the price dropped about a nickel. On the other hand, at the Chicago citygate, which also fell about a nickel, deals totaled 453,000 MMBtu Thursday, down 40,800 MMBtu from a day earlier, ICE said.
Although significant pipeline capacity constraints have gotten rare since the Memorial Day weekend, Transco warned shippers Thursday of a potential OFO. Forecasts indicate continued moderate temperatures during the upcoming weekend throughout much of its market area, the pipeline said. In addition to the OFO possibility, Transco said effective Friday it will keep the pool balancing tolerance limited to 1% and will not allow either due-pipeline imbalance transactions or excess storage injections.
A pair of cold fronts should keep much of the Northeast wet and fairly cool during the weekend, according to The Weather Channel (TWC). The Midcontinent, western South and Lower Midwest are expected to be heating up to nearly 90 Friday, but moderate warming trends will be taking highs in the Upper Midwest merely into the comfortable 70s.
Eastern sections of the South actually are due to cool off a bit, Weather Central said, and keep air conditioning demand there relatively modest for the end of May.
Although the region had little price firmness to show for it, the West will remain unseasonably warm to hot, TWC said. Late-week highs are due to range from the mid 80s to low 90s across lower elevations of the Pacific Northwest and in interior California to more than 100 in the desert Southwest. Even the Rockies will get rather warm, with Denver expected to reach the mid 80s Friday. Coastal California and British Columbia will be the West's only really cool areas as even Edmonton and Calgary in Alberta are expected to top out in the mid to high 70s.
A Texas-based marketer said it didn't seem to be much of a bullish storage report to him, but apparently Nymex traders thought it was. And they were sending July futures much higher well before the tropical depression news came out, he noted. He said he didn't see much movement in cash prices until the late deals started moving higher due to the screen strength.
The cash market will be stronger Friday, the marketer predicted confidently. Not only will it have major prior-day futures support, but the deals will cover only the Monday weekday instead of the entire weekend, so the usual drop of weekend industrial load will not be a factor, he said. There also may be a fair amount of cooling load starting to develop in Texas, he added, as the air conditioner at his house is cycling off and on noticeably more lately than it had been.
It was a very routine bidweek, "smooth as smooth can be," the marketer continued. He is estimating the Chicago first-of-month index at $3.42. The citygate began bidweek trading at the NGI index plus 2 cents, but later got to index minus 2-3 cents, with some index flat deals getting done along the way, he said.
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