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Heat, Screen Backing Spur All-Points Gains

Much like a week earlier, the cash market got off to a strong start with double-digit increases across the board Monday. It derived support from a 13.6-cent rise in prompt-month futures on the previous Friday, Baker Hughes having reported a further decline in gas-directed drilling rig activity over the course of last week (see Daily GPI, May 23), and growing weather-based load -- primarily in the form of hotter temperatures having arrived over the weekend in the South.

The primary difference between Monday's upticks and their week-ago counterparts is that the most recent gains are considerably larger in nearly all cases.

Only a couple of increases fell short of 20 cents as overall they ranged from a little less than 20 cents to a little more than 35 cents. They were distributed pretty evenly across geographic market areas. Transco Zone 5 in the warm Mid-Atlantic region recorded the day's biggest gain.

Cash traders can count on more upward futures guidance Tuesday after the June contract, which is nearing expiration Thursday, added another 11.6 cents (see related story).

The Louisiana Department of Natural Resources had no changes to report Monday from the previous Friday's shut-in tally of 31.54 MMcf/d of gas and 3,785 b/d of oil and condensate from floodwaters in the state's south-central Atchafalaya River Basin, said Office of Conservation spokeswoman Anna Dearmon. Apparently the flooding impact is not as great as previously expected, she told NGI, and although the shut-in volumes could rise further, they are holding steady for the time being.

Although there will be slight backsliding of temperatures Tuesday in some parts of the South, highs will still range from the mid 80s to low 90s in most cases, and that is enough to prompt a fair amount of air conditioning demand. It could also be true to some extent northward along the Eastern Seaboard into New England, where Tuesday's peak temperatures are expected to peak from about 80 to the mid 80s from Washington, DC, through the Boston area.

It certainly won't be happening from the Midwest through the Upper Plains into nearly all of the West. Although the Phoenix area of the desert Southwest can again expect to hit the low 90s, lows within that vast region will be dipping into the 50s and 40s for the most part, and even such normally mild climates as those in Southern California's Los Angeles and San Diego are not predicted to reach even 70 Tuesday.

Except for a few conditions where temperatures are due to reach the mid 40s or less, the new surge of cooler weather is unlikely to produce any significant jump in cooling demand for gas.

California's two biggest distributors, SoCalGas and PG&E, went into the weekend with high-linepack OFOs in place but emerged from it without them. The PG&E citygate was up about 20 cents Monday after having fallen about half that much Friday, IntercontinentalExchange (ICE) said, but trading there on the ICE platform was essentially static with Friday's volume of 1,244,100 MMBtu slipping only slightly to 1,233,900 MMBtu Monday. Meanwhile, the Southern California border also more than recouped its Friday drop in rebounding nearly 30 cents, while its ICE volume rose moderately from 705,600 MMBtu to 743,900 MMBtu.

The e-mail notice of a new high-linepack OFO by SoCalGas for Tuesday didn't get sent until the afternoon and thus had no impact on that morning's cash trading.

Back in the East, rising temperatures in its market area caused Texas Eastern M-3 volumes on ICE to skyrocket from 270,100 MMBtu to 642,100 MMBtu, while M-3 pricing rose about a quarter. However, even with a similar price jump amid peak temperatures near 90 in the Houston area, the Houston Ship Channel saw ICE trading activity recede from 308,700 MMBtu to 259,000 MMBtu.

The weather is still not as hot as a Southern utility would have expected by late May, its fuel buyer said, but there's a fair amount of air conditioning load and it's growing. Because some of its supply is being used for current power generation needs, the company is buying regularly in the spot market to meet storage injection targets, he said.

The buyer said he is getting inquiries about selling June baseload to the utility, but since it plans to rely on summer term contracts instead, he's not receiving any price quotes.

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