It’s not exactly free, but at 7 cents/MMBtu, the new all-time low cash quote reported Tuesday to NGI‘s price survey for Rockies gas into Kern River, it’s very close to giving it away. Close behind was another record-breaking 8-cent quote for Cheyenne Hub. This follows on a 15-cent package that was sold on CIG as recently as last week (see Daily GPI, Sept. 5), which tied NGI‘s all-time low cash quote established by both Kern River and Opal in April 2002 (the record also was tied in June of this year).
It’s basis blowout with a vengeance. Price weakness continued at most of the other Rockies points also. However, the rest of the market saw strong gains across the board, buoyed by a 39-cent futures spike on Monday and uncertainty over whether some U.S. gas will be diverted south of the border to help Mexico make up for supply shortfalls resulting from terrorist-caused explosions early Monday on several Mexican gas pipelines and a crude oil line (see Daily GPI, Sept. 11).
Talk of increasing tropical activity in the Atlantic (see futures story) after what has been another benign hurricane season so far for Gulf of Mexico production added another bullish note to the overall market. Wednesday’s cash market will continue to have prior-day futures support, but only a modest amount after the October contract eked out an increase of 4.3 cents Tuesday.
Tuesday’s cash gains ranged from a little less than a nickel to a little more than 60 cents. In most cases they were uniformly strong across geographic market areas in reaching 30 cents or more.
Cooling load remains relatively light outside the desert Southwest, but believe it or not, the market actually has a small amount of heating load with more than a week left before summer officially ends. Frost and freeze warnings were posted for Tuesday night in northeast Minnesota and northwest Wisconsin in the wake of what The Weather Channel (TWC) called a “robust” cold front. But temperatures will rise again Wednesday in advance of the next cold front, TWC said.
Not only did the low-quote record fall in a big way Tuesday, but Cheyenne Hub’s record Monday for lowest price average ever of 24 cents (CIG was only a penny above it in averaging a quarter) got tied a day later — twice, no less. Kern River and Northwest-South of Green River also averaged 24 cents Tuesday.
The lowest average recorded by NGI prior to Monday was 32 cents at Cheyenne Hub on the trade date of April 9, 2002 (for April 10 delivery).
Besides the sub-dime low ends for Kern River and Cheyenne Hub, other Rockies points bottomed out as follows: Northwest-domestic and Opal, 10 cents; CIG, 15 cents; Northwest-South of Green River, 20 cents; and Questar, 30 cents.
With Henry Hub rising a little more than 40 cents to just shy of the $6 level, that left basis spreads from the Rockies to the Hub as large as a whopping $5.70 or so.
The Rockies market’s misery may continue for one more day, as a maintenance shutdown of two compressor stations on the Northwest system is scheduled to continue through Thursday. And the well documented situation of inadequate pipeline takeaway capacity in the Rockies is being exacerbated by Questar’s mandated removal of all interruptible storage inventories from its Clay Basin facility (see Daily GPI, Sept. 10). Also, CIG followed up Friday’s implementation of a Strained Operating Condition with an OFO declared for Wednesday (see Transportation Notes) due to its system having a very high operating load and its storage facilities being “currently at or near the operational field limits, including the largest field, Ft. Morgan, which is nearly at operational capacity.”
There was only a moderate increase of U.S. gas exports to Mexico Tuesday, reported Mark Chung of Bentek Energy in Golden, CO. His company’s monitoring of pipeline flow nominations showed that Texas Eastern still was not sending any gas across the border. But the Tennessee connection in South Texas increased to 225 MMcf/d Tuesday, up from 213 MMcf/d the day before, Chung said. And exports by El Paso into Mexico’s Baja California peninsula rose from 290 MMcf/d Monday to 349 MMcf/d Tuesday, he added.
Kinder Morgan Texas had said it was not moving any gas to Mexico on Monday. If such nominations are initiated, the intrastate pipe said that for competitive reasons it will not disclose any volumes.
One source speculated that exports may not be increasing very much in the wake of the explosions because Mexico’s national oil company, Petroleos Mexicanos, may not be able to use them effectively. The pipeline blasts occurred in the southeast Gulf Coast state of Veracruz, which is far from the U.S. border.
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