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Small Amount of Firming Returns in Near-Flat Market

Small declines were still in a modest majority Thursday in a market that saw no changes of more than a nickel or so either up or down at any location. The flat to slightly higher quotes were chiefly due to some growth of cooling demand in the Northeast and South along with the previous day's rise of 3.4 cents by June futures.

Most points dropped from 2-3 cents to about a nickel, but they were almost balanced by rampant flat numbers and a few gains of up to about a nickel.

The Energy Information Administration handily exceeded consensus expectations in the low 90s Bcf when it reported a 105 Bcf addition to storage for the week ending May 20. The big build clearly sounded a bearish note to Nymex traders, who pushed June futures 5.3 cents lower to $4.326 on the contract's expiration day (see related story). The settlement was about 3-4 cents below the Henry Hub average for Thursday.

In addition to the screen's negative signal, the extra decline of industrial load over a long holiday weekend makes it close to certain that softer numbers will be in vogue Friday at most if not all points, one source said.

Although they would see little change in the eastern half of the South, after a one-day dip into the 70s high temperatures were due to climb back into the low to mid 80s in the region's western end as far as Oklahoma, with Texas even hotter as forecasts in the 90s and occasionally the low 100s were common. Similarly, much of the Northeast is rebounding from a brief cooling trend, with New York City and Philadelphia expected to peak in the mid 80s.

An unseasonably cool spring continues in the Midwest, with regional highs remaining limited to the mid 60s or lower. And the status quo remains in effect in the West: mild to chilly in most of the U.S. portion (the Phoenix area is an exception with peak temperatures staying in the 100 area), and moderately colder north of the border.

An update on Atchafalaya Basin-area shut-ins in South Louisiana (see chart) was posted too late for Thursday afternoon's deadline, but a spokeswoman for the Louisiana Department of Natural Resources (DNR) said the shut-in statistics were expected to see little if any change from Wednesday's posting of 31.54 MMcf/d of gas and 3,785.1 b/d of oil. Those were the same levels reported on the previous Friday (see Daily GPI, May 24).

It appeared that the flooding might be a major market event when DNR estimated a potential 252 MMcf/d of shut-ins as the Army Corps of Engineers began opening gates at the Morganza Spillway in order to ease Mississippi River flooding downstream at Baton Rouge and New Orleans and in the massive refinery/petrochemical plant complex between them. But the shut-in figures have been stagnant for about a week now, and the Baton Rouge Advocate reported Thursday that the Corps earlier in the week had reclosed three of the total 17 gates that were opened.

SoCalGas did not send an e-mail notification of a high-linepack OFO for Thursday (see Transportation Notes) until shortly after 7:30 a.m. CDT, so it had no impact on Wednesday's trading in which the SoCal citygate was flat and border quotes fell 4 cents. The OFO will remain in effect Friday, but IntercontinentalExchange (ICE) reported only minimal price impact again, with both points down 2-3 cents or so. However, though ICE volumes fell marginally at the border (from 771,700 MMBtu Wednesday to 715,100 MMBtu Thursday), they soared at the citygate from 392,600 MMBtu to 564,000 MMBtu.

Oklahoma City-based Devon Energy reported Thursday that its Cana processing plant in Canadian County, OK, had sustained significant damage from a tornado two days earlier. Approximately 36 MMcf/d of gas and 2,000 b/d of natural gas liquids (NGL), net to Devon's interest, are curtailed as a result of the plant outage, the company said. In spite of the curtailment, Devon continues to produce about 100 MMcf/d and 5,000 b/d of NGLs from the Cana field. At the time of the tornado, the plant had been temporarily shut in as a precautionary measure, with all personnel evacuated to on-site storm shelters.

"Our preliminary assessment indicates that it could take up to three months to repair the plant and fully restore production," said Dave Hager, Devon executive vice president of exploration and production. "We expect the impact on Devon's full-year production to be less than one-half of 1%."

It's getting into the time of year when Florida Gas Transmission (FGT) often issues Overage Alert Days because of hot weather in its market area, but FGT said Thursday that due to milder temperatures being forecasted in Florida for the next couple of days, it could possibly issue an Underage Alert Day.

A marketer in the Upper Midwest said he was still buying spot gas to meet the heating needs of clients as Midwest weather is staying chilly on the verge of the Memorial Day weekend. Local temperatures had reached only the high 40s as of Thursday afternoon, he said.

The marketer reported buying June baseload at last-day settlement basis of plus 26 cents at the citygates of MichCon and Consumers Energy. A basis increase had "kind of sneaked up on us there," he said, because the company had heard basis offers of plus 23 cents before Thursday.

A minor amount of heating demand extended into the Lower Midwest as well, where a utility staffer said it "still felt kind of cold this morning."

Likely in reaction to the bearish storage report and the subsequent screen weakening, June bidweek prices were in retreat Thursday, ICE said. It found Panhandle Eastern averages slipping from $4.15 Wednesday to just under $4.10 Thursday. Meanwhile, the Houston Ship Channel fell nearly a dime to about $4.24 and Northwest-Wyoming was down about 6 cents to $3.94, ICE said.

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