After losing nearly a dollar in value in a week, dropping to $6.689 Thursday from $7.651 on Wednesday, Aug. 9, near-month gas futures staged a somewhat surprising reversal on Friday on technical factors and in response to an increase in tropical activity. The September contract soared to a daily high of $7.090 just after 1 p.m. before backtracking to end the day up only 4.2 cents at $6.731.
The October contract added 2.1 cents, ending at $6.851 after posting a daily high of $7.200, and the November contract climbed 7.1 cents to $8.921. The January and February contracts remained above $11 with January still $4.39 more than the September futures contract.
“I think the reason natural [gas futures] firmed up a little bit is the longer standing technical bottoming action,” said Broker Jay Levine of enerjay LLC. He noted that when compared to the rest of the petroleum complex, natural gas still is “not priced very high. I think natural gas has a limit to how far it can go down. I think $6.50 is a pretty good support level, and I think it will hover around there and form a base, which is what I think is happening right now.
“I also think some people are looking at a wave or two out there in the Atlantic, and while no one is giving them much chance of turning into something, you never know.”
Despite the rally Friday, however, Levine said the market still has “a weak tone to it for the reasons that we all know: plenty of supply, not much demand and nothing on the horizon to change that.” He noted that summer heat has been dissipating except in Texas and the West. On Friday, gas burns by generators were down across the country with the exception of the Western Electric Coordinating Council and the Southwest Power Pool, Bentek Energy reported in its U.S. Power — Gas Burn Report.
“It seems like we are having a difficult time redeveloping heat in the East,” said MDA EarthSat Energy Weather Deputy Director Matt Rogers. “That’s a big change from last year when we actually carried that heat on into September. Texas and parts of the deep South, anywhere from Texas all the way over through the [Tennessee Valley Authority] area, I think could still see some significant heat this summer and also over toward California and parts of the western states; I think they are primed to see some heat next week. But as far as I can tell [through the end of August] it will be a quieter situation.
“The central to eastern U.S. will still get some heat at times but more like the upper 80s than 90s to 100,” said Rogers. “The ERCOT area should continue to be strained until the early part of September.”
With cooling load falling, there remains little doubt that the next weekly gas storage report will reveal an even larger injection than the 37 Bcf build reported by the Energy Information Administration (EIA) for the week ending Aug. 11. Based on data from Bentek Energy’s report, gas demand from power generation will be down 15% for the week to 186 Bcf from 218 Bcf during the week ending Aug. 11. During the week that ended on Aug. 19, 2005, about 60 Bcf of gas was injected into storage, according to EIA data.
Despite the milder weather and likelihood of rising storage injections, however, attention is beginning to turn back to tropical weather and its potential to disrupt supply in the Gulf of Mexico. The most active part of a so far very inactive Atlantic hurricane season is approaching, and several areas in the Atlantic, Caribbean and the Gulf of Mexico bear watching over the next week, according to Rogers.
“The tropics have been extremely quiet this year, the quietest start in several years, but we are seeing more activity out there, more waves and disturbances, which means we might be getting to that tipping point where we are going to start getting more active weather. Within the next week or two we may see a few more named storms out there,” he said.
Rogers said MDA EarthSat is watching several areas currently, including a wave off the African coastline and disturbances in the southwestern Caribbean and off the coast of South Carolina. “I don’t see any imminent Gulf threats here at the moment, but Sept. 10 is the peak of the season, and as we get to the end of August we tend to see more activity. Within a week or two we will probably have a bunch of named systems that we will start talking about.
“The water temperatures in the Gulf aren’t as warm as last year but you still can’t rule it out,” Rogers said. “We’ve had category 3-4 hurricanes with temperatures the way they are now. The coverage and the intensity of the warmth, though, isn’t as strong as it was last year so it does reduce the chances anyway.”
Rogers said the disturbance off South Carolina should be moving into Florida on Saturday and may emerge in the eastern Gulf of Mexico over the weekend, but models are forecasting very strong wind sheer over the weekend, which probably won’t allow the system to develop further. “It doesn’t seem like it will be a threat at this point,” he said.
“There is one down near Panama that a few models today show developing and moving toward the Yucatan peninsula next week. So when we get here on Monday that’s one we are going to have to examine more closely if it does pull up that way. That’s an unusual source region at this time of year. Maybe there’s a lower confidence on that one.”
©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |