In a seemingly improbable reversal of fortune, cash prices staged a rally at all points Tuesday, with only MRT failing to realize a double-digit gain. Except in parts of the heating up West, weather fundamentals remained weak and prior-trading-day screen support was negative.
The restoration of industrial load after a long holiday weekend and the appearance of Tropical Storm Florence were cited as reasons for the cash market’s firmness. But one source scoffed mightily at the Florence influence. The storm was far out in the central Atlantic, barely qualified for named status, was not due to approach the East Coast until sometime early next week, and in its early incarnation appeared to be pointed toward the South Atlantic states, he pointed out. Even if it should veer more toward the southwest later this week, it likely would have to survive a trip across the Florida peninsula to reach the Gulf of Mexico, he said.
Not counting MRT, Tuesday’s gains ranged from about 15 cents to as much as 70 cents or so. The overall advance was distributed fairly evenly among geograhic market areas, although Louisiana Gulf Coast points tended to lag most other increases.
Despite the rally, only Questar is now trading at a premium to first-of-month indexes. All other points are about 15 cents or more below index, with nearly all Gulf Coast, Midwest, Appalachian and Northeast prices seeing triple-digit deficits.
Whether the market can sustain its newfound strength Wednesday is arguable. Cash did get some backing from a 16.2-cent screen rally, which helped lift Tuesday’s late quotes. But with even the South recording relatively moderate late-summer temperatures and substantive cooling load scarce across the northern U.S. and Canada. Only the interior West is experiencing seriously hot weather early this week, and even Phoenix isn’t reaching its customary 100-degree-plus highs.
In the West, weekend high-linepack OFOs by SoCalGas and PG&E had been ended by Monday (see Transportation Notes).
Although most cash deals have been completed by the time futures action gets going each day, there was still a fair amount of physical trading going on around 10 a.m. CDT when the futures rebound was obviously under way, and that tended to push late cash quotes higher, a marketer said. He also noted that power generators tend to order gas later than others when they get their morning load forecasts, and thus they were more susceptible to the higher late prices. There’s also more impact from the return of industrial load after a holiday weekend, he said.
The marketer added that he was sure some people were buying gas to put into storage, but said nobody indicated that to him. He thought they had a more advantageous opportunity to inject storage over the weekend when prices were lower, but add that storage operators’ requirements for rateable injections limit how much a company can put into its account each day. Also, he said, a lot of people don’t use traditional storage to hedge their cash positions but instead rely on packing or drafting pipe linepack as necessary (within limits, of course) to adjust supplies.
A utility buyer in the South observed that he bought production-area gas into TGT for just under $5 for the weekend, but Zone SL prices were nearly 40 cents higher Tuesday. He agreed that a rally had seemed unlikely going into the weekend, but suspected that after falling a great deal for nearly all of last week, prices “may have hit a bottom pschologically.”
Summer seems to have broken three weeks early this year, the buyer commented. “It’s very mild here” and in much of the rest of the South with highs in the low to mid 80s. Of course, he noted, the region can still get another couple of hot weeks during September.
Except for the West, the intermediate-term weather forecasts look generally bearish. In its six-to-10-day prediction for the Sept. 11-15 workweek, the National Weather Service looks for above normal temperatures everywhere west and north of a line running north through western Arizona and along the eastern border of Nevada before curving to the northeast through southeastern Idaho to include all of Montana and most of North Dakota. Below normal readings are expected in three areas: from North Texas through most of the Midcontinent and including most of eastern Colorado and northeast New Mexico; in the Upper Midwest states of Wisconsin and Michigan; and in all of the Southeast from Virginia through Alabama except for the Florida peninsula’s southern end.
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