With the exception of a few eastern points, weekly physical gas prices posted mostly moderate advances at all locations. For the week ended June 20 the NGI's Weekly Spot Gas Averagerose just a penny to $4.43 with outsize losses at Northeast points pulling down broad, but thin gains elsewhere.
Of the actively traded points Algonquin Citygates posted the week's largest gain in adding 73 cents to average $5.24 and Transco-Leidy Line suffered the indignity of the greatest loss in dropping 35 cents to $2.14. All regions were either unchanged or higher, but in most cases only by a few pennies.
Regionally California was the week's poorest performer coming in flat at $4.90 and the Northeast was just a touch higher sporting a gain of 2 cents to $3.64.
Rockies prices were a nickel higher than the previous week at $4.52, East Texas rose by 6 cents to average $4.62 and South Texas saw an 8-cent improvement to $4.57.
South Louisiana weekly prices rose by 9 cents to $4.62 and both the Midcontinent and Midwest enjoyed a 10 cent gain to $4.56 and $4.85 respectively.
July futures took a pounding dropping 20.8 cents to finish the week at $4.531 despite yet another triple-digit natural gas storage injection report.
The Energy Information Administration reported a storage increase of 113 Bcf for the week ending June 13, about 3 Bcf above market expectations, and after some early market strength following the release of the data, the market ground lower finishing close to the lows of the session Thursday.
Traders were looking at the report for signs of just what impact recent elevated temperatures have had on the rate of storage builds. It appeared to be not that much. Last year, 92 Bcf was injected, and the five-year average is for 87 Bcf. Credit Suisse was expecting an increase of 109 Bcf, and Bentek Energy calculated a 110 Bcf injection. A Reuters poll of 22 traders and analysts revealed an estimated 110 Bcf average with a range of 101 Bcf to 115 Bcf.
Tim Evans of Citi Futures Perspective nearly hit the nail on the head with a 112 Bcf estimate and noted that the 113 Bcf build "largely sustains the existing background supply/demand balance, with more intense heat needed to offset the year-on-year growth in supply. Otherwise, above average injections will remain the norm, as has been the case for nine consecutive weeks."
Bentek saw a large component of the robust build as being due to lower demand. "Demand decreased by 8 Bcf from the previous week, driven largely by a drop in power burn, which declined by an average of 1.2 Bcf/d for a total of 8.8 Bcf through the week," the firm said in a report. "Total supply noted a decline of 3 Bcf, driven by a decline of 3 Bcf in Canadian imports and 1 Bcf from production. Of the decrease in the power sector, a majority of the dip occurred in the Producing Region, where sample injections at facilities such as Pine Prairie have remained strong."
Inventories now stand at 1,719 Bcf and are 706 Bcf less than last year and 851 Bcf below the 5-year average. In the East Region 70 Bcf were injected and the West Region saw inventories up by 16 Bcf. Inventories in the Producing Region rose by 27 Bcf.
Despite a bearish storage number, the market was actually up slightly in mid-day trading after dropping initially after the storage report came out. "This suggests that the bulls retain significant influence in the market," analysts with EMEX LLC said in a note Thursday afternoon. "We will still need record injection numbers (85 Bcf/week) to refill storage to the levels expected by the Energy Information Administration and to get to the high of 2012, we would need to average 109 BCF/week."
Looking further down the road, EMEX said bulls might find room to roam. "With the need to continue to refill storage at a breakneck pace, EMEX maintains a bullish position on the natural gas market for the balance of the year, pending a clearer winter weather forecast."
Analysts saw the futures weakness as indicative of "traders appear[ing] less convinced that the pace of inventory restocking will materially slow," said Teri Viswanath, director of commodity strategy for natural gas at BNP Paribas Friday.
"However, the current -4% loss on track this week might prove short-lived as the subsequent build in cooling demand possibly prevents the weekly stock build from breaching the 100 Bcf mark for the next several months. What's more, the population-weighted cooling degree days for the peak air-conditioning months of July and August are expected to significantly outpace year-ago levels. While it is simply too early to get a definitive read on the upcoming weather, the near-term weather models are encouraging with a build in heat in the eastern half of the US now anticipated for the first week in July.
"Not surprisingly, we expect prices will remain supported above the $4.50 level and will likely recover on further warmer changes to the weather forecasts next week," she said.
Others are also maintaining a positive outlook with a chance of prices trading 30 cents higher. "The shortfall against five-year average supply narrowed by 25 Bcf in keeping alive the bearish dynamic of deficit contraction," said Jim Ritterbusch of Ritterbusch and Associates in closing comments Thursday to clients. "The current deficit against the averages now stands at roughly 850 Bcf, a shortfall of approximately 33%. We are maintaining a view that this shortfall will need to be cut to at least below 30% before supply concerns will be alleviated. Until then, this market will remain highly reactive to any pronounced or extended hot temperature forecasts.
"Although some above-normal trends are expected along the East Coast out toward the 4th of July weekend, expected mild patterns across the mid-section of the country are currently providing an offset. All in all, [Thursday's] price action failed to alter a near-term bullish stance in which the $4.85 level still appears attainable. Any August or September long positions established today should be protected by stops below the $4.54 level on a close-only basis in referencing July futures. We would also suggest adding to fall-winter bull spreads."
According to forecasters, Los Angeles and much of California were expected to see pleasant load-killing weather Friday. "Los Angeles is in store for a continued stretch of sunny, warm days," said AccuWeather.com's Katy Galimberti. "For the weekend and to start off next week, temperatures should hover around the 80 degree Fahrenheit mark. Sunshine will appear each day after low clouds dissipate in the afternoon. She added that near-perfect conditions could be expected for the series between the Los Angeles Angels and Texas Rangers.
"Overnight temperatures should fall to the mid-60s. The consistent sun and warmth will last throughout the start of next week [and] Monday could be slightly warmer as temperatures rise slightly into midweek."
AccuWeather.com forecast that the high Friday in San Francisco of 69 should ease to 66 on Saturday and Monday. The normal high in San Francisco is 71. Burbank's high of 89 Friday was anticipated to slide to 87 Saturday and 84 on Monday. The seasonal high in Burbank is 82. San Diego's Friday high of 76 was predicted to fall to 74 Saturday and 73 Monday. The normal high in San Diego mid June is 72.
In Friday's trading gas for delivery over the weekend and Monday plummeted as a 1-2 combination of a weak screen and modest temperatures gave buyers little incentive to spring for a three-day package, especially when spot purchases can be made by instant electronic communications. The selling was broad and pervasive and no point made it to the positive side of the trading ledger. The overall physical gas price decline averaged more than a quarter. California points were consistently weak, but New England locations were hit with a drubbing near $2 in some instances. By the close of futures trading the market had made it four out of five losses on the week and July was down 5.3 cents to $4.531 and August shed 5.1 cents to $4.552.
California power prices held steady. IntercontinentalExchange reported that Monday peak power at NP-15 rose $1 to $52.00 and peak Monday power at SP-15 added $3.22 to $54.54.
Deliveries to Malin for the weekend and Monday fell 15 cents to $4.48 and gas at the PG&E Citygates shed 13 cents to $5.05. At the SoCal Citygates packages fell 15 cents to $4.84 and SoCal Border points came in 13 cents lower at $4.64. Gas on El Paso S Mainline skidded 17 cents to $4.67.
Next day deliveries to points on the vast PJM power grid declined as mild weather patterns were expected to prevail. WSI Corp. in its morning outlook said, "high pressure will attempt to nose southward into the Mid-Atlantic [Friday] with partly sunny, seasonable and less humid conditions. However, another disturbance and a residual frontal boundary may bring a round of [load-killing] rain and storms across western and southern PJM today. An area of rain and embedded thunderstorms may move out of western PJM into the lower Mid-Atlantic late tonight through Saturday. More tranquil weather is expected by Sunday, though an isolated shower or storm is possible across the Appalachians and western PJM. High pressure will slide off the East Coast early next week. This will result in a southerly flow, which should result in warmer temperatures and increasing humidity levels. This warmth and a potential frontal system may lead to showers and storms over western PJM by Monday, which should spread eastward during Tuesday. Rainfall amounts may range 0.25-1+."
From a temperature perspective, "the aforementioned cold front and its associated wet weather will continue to support a cooling trend and lower humidity levels during the next two to three days. Highs may fall back into the mid 70s to mid 80s. Lows may range in the 50s and 60s. Temperatures and humidity levels may begin to trend up early next week [and] highs may warm into the 80s to near 90 and lows may range in the 60s to low 70s," the forecaster said.
Gas on Columbia TCO fell 15 cents to $4.43 and weekend and Monday packages on Dominion South dropped 39 cents to $2.40. On Transco Leidy gas changed hands at $2.10, down 27 cents and deliveries to Tennessee Zone 4 Marcellus shed 32 cents to $2.01.
New England points took it on the chin as forecasters called for clearing conditions. "While portions of the Central and Southern states deal with showers and thunderstorms this weekend, the weather around Boston will be free of rain," said AccuWeather.com meteorologist Alex Sosnowski. "A storm system will cause rain to bulge northward for a time on Saturday over the mid-Atlantic states. However, the rain will stop short of reaching New England and will retreat to the south and east on Sunday. This paves the way for some sunshine both days of the weekend."
He added that "High pressure centered over Hudson Bay, Canada, will have enough influence to not only keep rain away but will also deliver low humidity. Temperatures will average near to slightly below normal this weekend. Temperatures typically range from a low near 60 to a high in the upper 70s."
Weekend and Monday deliveries to the Algonquin Citygates dropped a gut-wrenching $1.98 to $2.83 and gas on Iroquois Waddington was off 91 cents to $3.89. On Tennessee Zone 6 200 L parcels were seen at $2.91, down a stout $1.82.
Gas bound for New York City on Transco Zone 6 fell 52 cents to $2.40 and deliveries on Tetco M-3 dropped 40 cents to $2.43.