Prices continued to rise across the board Wednesday, spurred largely by the previous day’s spike of 32.6 cents by November futures for the first daily close above $5 since January. However, there was some indication that the cash market is beginning — at least temporarily — to acknowledge that weather-based fundamentals have been getting weaker after virtually all gains shrank Wednesday and not all of them were in double digits as was the case Tuesday.
An uptick of a little less that C5 cents at Westcoast Station 2 barely kept all-points firmness in play; other gains ranged from a little less than a dime to a little more than 35 cents.
After meandering back and forth to either side of unchanged during the day, prompt-month futures finally settled at a loss of 6.1 cents despite substantial strength in Nymex’s petroleum-related energy offerings (see related story).
The modest amount of market buzz created Tuesday by Atlantic tropical developments was fading quickly. A low-pressure area over the southwestern Caribbean Sea and parts of Central America was nearly stationary and still poorly disorganized with a low chance of development, if any, the National Hurricane Center said Wednesday. Meanwhile, it no longer had a tropical wave west of the Cape Verde Islands on its Atlantic map.
Canada, the Rockies and a few locations in New England were the only areas where lows around freezing or slightly less remained in the Thursday forecast. Otherwise the mid to upper 30s is about as cold as it’s getting in northern market areas, and daytime highs in the 50s and 60s are fairly moderate for the most part. Weather Central even predicted that New York City and Philadelphia will reach the 73-74 area Thursday.
A touch — but not much — of cooling load might be resurfacing in parts of the South as some sections are due to peak in the low to mid 80s. Parts of the South Atlantic area were a notable exception, though, with Atlanta not expected to get above the low 70s.
Outages of nuclear units at three western plants were believed to have a role in keeping many regional prices strong in spite of generally moderate conditions outside the Rockies.
A Gulf Coast trader said one of her company’s producer clients certainly considered nuclear plant outages a price booster, estimating that they were resulting in 1.2 Bcf/d of extra gas demand. Also, she thought some of the recent cash strength was because “gas is a bargain compared to the futures strip.”
The trader said “the markets [buyers] are trying” to get November deals going, but she was still waiting on her producer clients to get their price/supply ducks in a row, so to speak. She reported not seeing any bidweek deals getting done on IntercontinentalExchange; some bids and offers were being posted, she added, but nothing was getting hit.
A Southwestern utility buyer said his region was just about through with summer, with the company having little air conditioning load left. It will take until late November before some significant heating load arrives for the first time since last winter, he said. He agreed that nuke outages were helping support western gas prices.
Downward pressure on prices from near-full storage is easing a bit. Last week’s cold snap in the South must have caused some significant draws from the two storage facilities of Southern Natural Gas. Whereas the pipeline had reported being 97% full on its total working capacity of 60.0 Bcf as recently as Oct. 1, it said that last Thursday (Oct. 15) inventory stood at 56.1 Bcf, or 93% of capacity. That compares with 53.2 Bcf (89%) on Oct. 16, 2008 and 55.3% (92%) on Oct. 18, 2007.
Cameron Horwitz of SunTrust Robinson Humphrey (STRH) said he expects a 25 Bcf storage build to be reported for the week ending Oct. 16. The lower sequential injection is largely attributable to great heating demand, he said, as heating degree days increased more than 50% from the previous week.
In a Wednesday advisory, STRH said gas market bulls recently “have gotten jazzed up” over private weather forecasts of impending colder-than-normal winter weather. “Some prognosticators are even calling for the most frigid conditions in over a decade, which would imply colder conditions than the [2000-01] heating season.” To place things in context, that season experienced roughly 15% more heating degree days than the average one, STRH said, and assuming a similar situation this winter, “we would expect to see roughly 750 Bcf more gas withdrawn from storage” than would otherwise occur, all other things being equal.
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