The recent arrival of a cold front from Canada will keep Northeast temperatures moving lower Friday, and southern mercury levels will continue to inch downward at many locations as well. Those factors, along with further impetus from the previous day's nosedive of 14.6 cents by August futures based largely on expectations of a bearish storage report (which were realized in spades), resulted in cash market softness across the board Thursday.
Once again Northeast citygates recorded the largest declines among losses ranging from about a nickel to 30 cents or so. Texas Eastern-East Texas, where Wednesday's single gain had occurred, was down nearly a dime Thursday.
The Energy Information Administration handily exceeded consensus expectations from the low to mid 80s Bcf when it reported a 95 Bcf storage injection for the week ending July 1. The predictably bearish reaction by Nymex traders sent August futures 8.4 cents lower on the day (see related story).
The National Hurricane Center (NHC) said an area of cloudiness and showers extending from the Yucatan Peninsula and northwestern Bahamas across southern Florida and the southeastern Gulf of Mexico continued to drift northward or northwestward Thursday, but still had only a 10% chance (raised to 20% that afternoon) of becoming a tropical cyclone within 48 hours. Its primary market effect was bringing enough rain to the Florida peninsula to allow Florida Gas Transmission (FGT) to end an Overage Alert Day. NHC also was monitoring an area of "disturbed weather associated with a tropical wave" off the northeast coast of South America about 600 miles east-southeast of the southern Windward Islands Thursday morning, but it was given the same low odds of development as it spread over northern South America.
Despite FGT's lifting of its Overage Alert Day, Gulfstream Natural Gas kept an Operations Advisory aimed at preventing low linepack in place.
The system's primary cooling effect was in Florida, but its nearing proximity probably had something with forecast highs dropping one to three degrees in much of the eastern South. That didn't extend into Texas, though, as peaks from the mid 90s to the low 100s would continue to dominate practically all of the drought-stricken state.
Naturally, sizzling temperatures would also remain in the desert Southwest and much of inland California, and a warming trend was due to take the Rockies into slightly less torrid conditions. But the Midwest forecast had the region largely unchanged in moderate warmth, and cooling ranging from modest to strong was in store for the Northeast, coastal California, Pacific Northwest and Canada.
Shippers on PG&E's California Gas Transmission (CGT) system may have to mind their Ps and Qs on imbalances -- either positive or negative -- for the rest of the year. In announcing a first-ever "high/low-inventory" OFO starting Friday (see Transportation Notes), PG&E noted that it recently has reduced pressure in several segments throughout its service area to ensure they are operating at appropriate pressures (see Daily GPI, July 6). "Some of these pressure reductions are likely to be temporary, with pressure being restored once we are able to ensure the operating pressure is appropriate," the dual utility said. "Other pressure reductions may last throughout the summer if we need to do additional work on the pipeline."
CGT said the reduced pressures mean that the 600 MMcf of linepack it maintains under normal operating conditions to meet hourly and daily fluctuations in demand and supply has been cut to 200 MMcf. The Pipe Ranger bulletin board shows a greatly narrowed band of desired linepack between its minimum and maximum target levels from Wednesday through at least Sunday. It also said that the pressure reductions are expected to limit Redwood Path capacity to 1,805 MMcf/d (86% of normal volume) and Baja Path capacity to 870 MMcf/d (76%) through Dec. 31 in both cases. CGT said it will call a high/low-inventory OFO "each day for the foreseeable future, throughout the period of pressure reductions," with the tolerance range to be announced daily.
Westcoast said high linepack was continuing for the third straight day. Westcoast Station 2 had the lowest range of quotes (C$3.10-14) and lowest average (about $3.13) by far.
A Midwest utility buyer said she was sure that quite a few customers were still running air conditioners, but power generation load had come off noticeably since the end of June. She didn't think mid-July maintenance constraints on Northern Natural Gas will cause a problem, saying much the same thing happened last year and she didn't remember getting cut on nominations.
Meanwhile, a marketer in the Upper Midwest said conditions were still fairly mild Thursday but highs would be reaching the 90 area during the weekend. Consumers Energy still has transport issues that have given its prices a small premium over MichCon's recently, but for a change her company paid the same spot price at both citygates Thursday.
Clients had little in the way of cooling demand, she said, but the company was still adding some gas to their storage accounts regularly.
Despite Wednesday's weakness in the cash market, Bentek Energy's U.S. Natural Gas Hub Flows chart found changes in nomination volumes for Thursday evenly divided at the 23 trading points it covers. Eleven were up, 11 fell and one was flat, Bentek said. Most of the fluctuations in either direction were fairly minor, with a drop of 105,000 MMBtu (5%) at Texas Eastern M-3 the only loss exceeding 100,000 MMBtu. Similarly, major gains occurred at only two locations: Columbia Gas, up 162,000 MMBtu (6%), and MichCon, up 107,000 MMBtu (8%).
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