Due to a drop of a little more than a quarter by October futures a day earlier and the continued absence of significant weather-based demand in most areas, cash prices fell across the board Thursday.
Only one Rockie points avoided double-digit declines as losses ranged from a little less than a dime to about 75 cents. The Midcontinent and Louisiana tended to see most of the larger downturns.
The Energy Information Administration was near the bottom of an unusually wide range of estimates (45-90 Bcf) and well below consensus expectations in the low to mid 60s Bcf in reporting a 51 Bcf storage injection for the week ending Sept. 19. Initially lower October futures rallied on the bullish news, but by the end of the day had managed a gain of only 4.5 cents (see related story).
Hot temperatures continue in the desert Southwest, and the Denver forecast indicated that some Rocky Mountain highs will be approaching 90 Friday (as will inland California). However, the prediction of a peak temperature around 77 in Cheyenne, WY, showed that not all of the region will be that warm.
Otherwise, mild weather continues to dominate from the South through the Midwest, and although some chilly readings are showing up in the Northeast, Pacific Northwest and Western Canada, they have yet to generate any substantive amounts of heating load.
The pace of restoring shut-in gas production in the Gulf of Mexico slowed greatly. Based on reports from 63 companies, Minerals Management Service (MMS) said outages fell by a paltry 47 MMcf/d Thursday to 4,175 MMcf/d after having declined 338 MMcf/d a day earlier. Oil outages also saw a relatively small reduction of 42,249 b/d to 770,408 b/d, MMS said, while its tally of evacuated platforms and mobile drilling rigs was unchanged at 179 and three, respectively (see related story).
The Oct. 1 launch of NGI‘s new SoCal citygate index, heralded back in April (see Daily GPI, April 24), went through the first official day of bidweek Wednesday with no trading being reported there. The ice was breaking (so to speak) slowly Thursday, however, as ICE reported that 52,500 MMBtu/d of October baseload traded Thursday at an average of a little more than $5.72. The new index will represent gas delivered into the citygate pool of the SoCalGas system.
“It [the SoCal citygate] will take some time to get going,” said a Calgary-based producer, who added that he saw a total range of $5.63-85 posted on ICE. His company is going to wait a while; he said he will do Southern California border deals for October “and then maybe jump in” the citygate market in daily trading during the month. SoCal citygate momentum could build through the rest of this bidweek, he said, and the industry should expect further growth in it in succeeding months.
Western prices should be lower Friday due to the lack of weather demand, the producer said. The East might show a little firmness due to weekend cold in northern market areas, he added, but not all that much. The storage number helped move late prices higher Thursday, he noted, and the offshore outages are still having some impact, despite Thursday’s softness everywhere. He said it’s been cold enough at night in the Calgary area recently, with lows of 35-40 or so, “to have my furnace kick on the last couple of nights.” However, a warming trend is approaching, he said.
A Texas-based producer said she thinks most traders have a “wait and see attitude” on the SoCal citygate. They want to see how other people are going to treat it first, she said. Like her Canadian counterpart, her company is “taking a conservative approach;” it wants to make sure the point is firmly established before participating in trading there. Maybe the initial deals done Thursday will help get the ball rolling for others, she suggested.
Basis was getting weaker Thursday, the producer said, quoting Southern California border basis at minus $2.05.
The Northern Natural Gas bulletin board helped illustrate how cooling load has virtually disappeared from the Upper Midwest without being replaced by significant heating load yet. However, that may change during the weekend. Northern’s normal system weighted temperature at this time of year is 58 degrees, a posting said, but the pipeline was projecting averages of 68 Thursday and 70 Friday before they sink to 62 Saturday and 59 Sunday.
Citi Futures Perspective analyst Tim Evans noted that Chicago citygate prices have traded at a deep discount to prompt-month futures for much of the past week or so. To him, “that signals a pickup in Canadian gas imports. The incentives have been there to put this gas into storage and hedge it out against January or February futures at a spread on the order of $2.00.”
The race to become Tropical Storm Kyle was going slowly. What the National Hurricane Center called a “well defined” surface low-pressure system about 100 miles southeast of the South Carolina-North Carolina border was moving to the west-northwest at nearly 10 mph Thursday afternoon. And another low-pressure system was centered about 190 miles east-northeast of Grand Turk Island was going northward at around 10 mph. NHC said both had the potential for becoming a tropical cyclone, but it considered the latter system as having a higher probability of development.
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