Despite a warming trend in the Northeast that would contribute more power generation load to what already existed, the cash market recorded declines of nearly 20 cents or more — often much more — across the board Friday. The extra decline of industrial load over a four-day weekend, slightly negative guidance from Thursday’s 2.5-cent screen drop and persistent concerns over storage issues evidently outweighed the modest increase in fundamental weather support.
As could be expected, activity was more muted than usual because of the widespread early departures from trading desks for a longer than usual Independence Day weekend.
Even with higher temperatures expected, Northeast quotes tended to see most of the largest downturns that ran as high as about 70 cents at the Algonquin citygate. However, across the nation the Southern California border also was plunging, although temperatures were expected to remain high over the weekend in the interior section of the state (Sacramento was forecast to peak around 95 degrees Saturday).
A glut of supply contributed to western price drops. Kern River issued a Critical Notice about high linepack in all four segments, telling shippers to forgo any banking on its system and saying it would “take any necessary action” if scheduled quantities were projected to be more than actual deliveries. And Westcoast still had a zero pack/20% draft tolerance band that has been in place for many weeks.
Not every western pipe is concerned with high linepack, though. TransCanada’s Gas Transmission Northwest (GTN) system has filed a rate case with FERC due to revenue shortfalls resulting from low throughput (see related story). Changes in the competitive landscape have caused a number of long-term FT customers to not renew their contracts, TransCanada said Friday. These nonrenewals, along with shipper defaults, have resulted in a significant amount of unsubscribed capacity, it said.
Back in the East, Southern Natural Gas was another pipeline struggling with high linepack issues. It reported incurring “significant long imbalances” Thursday due to variations between actual flows versus entitlements at receipt and delivery points. It had not issued an OFO as of Friday afternoon, but said it would do so “if necessary to protect the operational integrity of the system.”
A Northeast marketer suspected that Friday’s price weakness may have meant that some buyers in the region may have underestimated the actual amount of demand that would crop up over the long weekend and could return to their offices Wednesday to find significant negative imbalances to resolve. Besides the projected increase in temperatures (the Boston forecast called Friday’s expected high around 80 degrees to jump to 87 Saturday), humidity was continuing to rise after the massive flooding earlier in the week and would be boosting Northeastern air conditioning load.
The marketer said he sees one bullish sign. Although gas prices have been undervalued relative to fuel oil costs for such a long time that some people may think all the fuel switching to gas that will occur has already happened, it is still happening among industrial end-users, he said. “They won’t do it for just one month, but if they can lock in gas prices they like for three months or more,” say over the July-September period, it will continue, he added.
A producer said the Calgary area had cooled off a bit but was still warmer than normal in the mid 80s Friday. He was pleased to note that NOVA Inventory Transfer (NIT) to Malin spreads covered not only his variable costs but also “about 10 cents of firm demand charges.” But that’s not exactly new, he said; it’s been that way for a while now.
The producer said he was not aware of anybody still doing July baseload deals Friday, which was natural because of aftermarket trading for a five-day flow period and the short days put in by most traders. But he did find that the NGX on-line platform showed 300,000 GJ/d traded Friday for all of July, so “something” was still getting done. He figured that just about all July business got wrapped up Thursday.
It was an “uneventful” bidweek for one industrial end-user. He said he finished his purchases early, adding, “Generally I find that when bidweeks are straddled around or before a holiday, you don’t want to be left without [securing] your supply before this thing [futures contract] expires.” Almost all his deals were at index, he said, and his company will do more daily swing buying than usual during July.
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