Price drops got larger and occurred across the board Thursday after several instances of firmness had remained a day earlier. An ongoing moderation of temperatures in northern market areas combined with a prior-day dip of 9.3 cents by prompt-month futures to further the cash market weakness.
A large majority of declines were in double digits as overall they ranged from a little less than a dime to about a quarter. Losses were distributed fairly evenly across market areas, although the Northeast and Midcontinent saw nearly all of those that were around 20 cents or higher.
Thursday's report of a 72 Bcf storage injection for the week ending April 29 handily exceeded consensus expectations in the mid to high 60s Bcf. Although the volume fell short of comparable year-ago and five-year average figures, June futures took a dive immediately afterward and wound up the day 31.6 cents lower (see related story) amid major softness throughout Nymex's petroleum-related complex.
Citi Futures Perspective analyst Tim Evans, noting that the 72 Bcf build was fairly close to the 78 Bcf five-year average for the period, suggested that the Easter/Passover holidays may have had a somewhat larger-than-expected impact on injections.
Besides the futures plunge, generally milder weather and the weekend impact of lower industrial demand are almost certain to keep the cash market falling in Friday's trading.
After being one of the few markets in which most locations were still rising Wednesday, the Northeast was softer all the way Thursday with considerably milder conditions predicted for the following day. Though still a bit chillier than the Northeast, the Midwest also is progressing slowly into warmer weather. It was much the same story in the South, but with highs still being limited to the 70s for the most part east of the Mississippi River, air conditioning load remains on the light side. Phoenix remains the hot spot of the desert Southwest, while inland California retreats from highs close to 90 and the Rockies sees a milder trend with highs in the 70s in its major consuming area of Denver.
After experiencing low linepack earlier in the week, PG&E declared a high-inventory OFO for Friday (see Transportation Notes) and citygate prices fell nearly 15 cents in response. And although it had said early Thursday morning that low linepack was extending a high probability of its declaring a Strained Operating Condition, a few hours later El Paso said linepack had returned to normal. Meanwhile, after having linepack go from low at the beginning of the week to normal, Westcoast was reporting excessive linepack Thursday.
IntercontinentalExchange (ICE) provided this example of how warmer southern weather is having little price impact so far: Despite Houston-area temperatures peaking in the low to mid 80s Thursday and Friday and due to go even higher over the weekend, not only did quotes at Houston Ship Channel drop by slightly more than a dime but its ICE-traded volume plummeted from 441,800 MMBtu Wednesday to 236,000 MMBtu Thursday.
But not too far away, Henry Hub numbers also slipped by about a dime, yet trading activity on the ICE platform fell only from 777,500 MMBtu to 742,300 MMBtu.
A western trader said the California coast has been mild to warm in the last couple of days but will be cooling off along with the state's interior going into the weekend. Snowfall is still occurring in the Sierra Nevada mountains, he added.
The West is just in the beginning stages of an abundant hydropower season, with much more of the cheap electricity showing up by mid-May, the trader said. That should keep western gas prices soft well into the summer after the season ramps up further, he said.
A Midwest marketer noted that his area's typically slow entry into spring is "especially slow this year." His company's clients still had a little heating load left this week but not much, and that is winding down fairly quickly, he said. But he expects to keep buying spot gas regularly to keep up with customers' storage injection needs and also because a few prepaid clients require daily purchases.
The overall cash market softness that set in Wednesday was accompanied by declining nominations for Thursday at 14 of the 23 trading points covered by Bentek Energy's U.S. Natural Gas Hub Flows chart, with two points being flat and the rest seeing volume increases. Texas Eastern M-3, where prices were up a couple of cents in one of Wednesday's relatively few gains, saw the only major nominations uptick of 487,000 MMBtu, or 25%, Bentek said. Five points recorded triple-digit volume losses: MichCon, down 217,000 MMBtu (18%); TCO (Columbia Gas in Appalachia), down 147,000 MMBtu (4%); Florida citygate, down 124,000 MMBtu (3%); Tennessee Zone 0, down 115,000 MMBtu (22%); and Chicago citygate, down 112,000 MMBtu (4%).
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