Following the week’s first two trading days in which a few points were left out of overall increases, the market made it unanimous: all points were up Wednesday, and nearly all of the gains were in double digits. The prior-day screen spike, still-substantial cooling load across the southern U.S. and lingering tropical storm concerns all played a part in the continuing price advance.
Only a couple of points failed to rise by at least a dime amid gains that ran as high as about half a dollar. A majority of points were up by a quarter or more.
After Wednesday’s gains, only a few scattered points — mostly in the Northeast and Western Canada — were still trading at deficits to their first-of-month indexes.
As anticipated, traders returned to their offices Wednesday morning to face the reality of the 2006 hurricane season’s fourth named storm. But Tropical Storm Debby was looking increasingly like a nonevent for the gas market as the day wore on. Debby was reported to be gradually strengthening during the morning, but the National Hurricane Center (NHC) said the storm was losing some organization that afternoon as it moved northwestward in the eastern Atlantic. More importantly, the NHC’s “five-day cone” of path projections continued to aim Debby toward the Northeast U.S. through early Sunday afternoon, when it was expected to take a more northerly course that appeared to have it skirting east of the Canadian Maritimes provinces.
Some believe Debby is the wrong place in the Atlantic Basin for the gas market to be looking. Count analyst Tim Evans of Citigroup among them. “Tropical Storm Debby may make the most headlines as the fourth named storm of the season, but it is the tropical wave working its way toward the eastern Caribbean that really bears watching as far as potential impact on producing areas in the Gulf of Mexico are concerned,” Evans wrote in a Wednesday advisory. “Beyond the weather prospects, it’s also possible natural gas has reached the limit of how far it can slip when the storage surplus is dwindling week by week.”
And Phil Flynn of Alaron Energies weighed in with this commentary: “The natural gas market is on storm rampage. A named storm is all you need to strike fear in the hearts of natural gas traders. This type of reaction shows that the market is aware of the unrealities of this sector. Back in the old days the natural gas market might not react until it saw the whites of the hurricane’s eye. Now anytime there is a remote chance that a tropical storm is in the Atlantic the market reacts.”
Despite all the storm hullabaloo, September futures failed to hold on to morning gains and ended the day down 13.3 cents. That and cooling temperatures either already under way or forecast for Thursday in the Northeast and much of the Midwest may make it difficult for cash numbers to sustain this week’s general bullishness beyond Wednesday.
“No clue” was a marketer’s response when asked about the cash strength at Midwest and Northeast citygates when those major market areas are going to be considerably cooler Thursday. Actually, he said if he had to make a guess, it would be a case of “following the screen.” The market has been strangely strong nearly all month, even after the early-August heat waves receded, he said, adding, “I can’t understand it, but I’ll make money from it.” He pointed out that the combination of Henry Hub’s increase and the screen drop had the Hub trading well over next-month futures, a reversal of their respective positions from Tuesday.
Even though generation load should be low Thursday, some Midwest power plants were still out there buying gas Wednesday, the marketer said. He remembered wondering, “Why are they running?” He surmised that maybe some nuke plants in the region were down, but that was not the case. In fact, NGI‘s NRC Power Reactor Status Report (https://intelligencepress.com/subscribers/power/nrc/) showed only three nukes running at less than 80% of capacity Wednesday, and nearly all of the ones at less than full power were at 91% or greater.
The marketer thinks Friday will be fairly busy with September bidweek business, but acknowledged that some may prefer to wait until after the weekend when fresher futures data and weather forecasts will be available.
A western trader said he was not seeing all that much power generation load in his region, so he assumed that much of Wednesday’s cash strength was a function of Nymex’s soaring nearly 40 cents the day before. “I think the market is overpriced, even though I’m a seller,” he proclaimed. California continues to be the strongest market in the West, he said.
Noting that the screen was making a rebound in afternoon Access trading, he mused, “What’s up with that?” People are still “way too tense” after Hurricanes Katrina and Rita last year, he said. “That doesn’t mean every storm is going to be bad for the next 20 years.”
Things have been very quiet so far in September business, the trader said. However, he reported seeing Sumas traded at index plus a nickel for next month, which he said was surprisingly strong. He thinks bidweek’s busiest day will be Monday, but said to “expect a flurry” of September deals Friday. Thursday, Aug. 31 should be a total nonevent for September trading as virtually everyone will have finished before then, he predicted.
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