Physical gas for delivery Friday gained ground even though most traders hunkered down and got their deals done prior to the 10:30 a.m. EDT release of storage figures by the Energy Information Administration (EIA).
The cash market was characterized by broad, often double-digit gains in Texas, Louisiana, the Midcontinent and Midwest. Had it not been for setbacks in the Northeast and Southeast, the market would have been about a nickel higher. The NGI National Spot Gas Average rose 8 cents to $2.62.
EIA reported a build of 39 Bcf in its weekly storage report, about 4 Bcf less than what the market expected, and at first prices rose. Those gains proved to be elusive; at the close August had eased nine-tenths of a cent to $2.777 and September was lower by 1.3 cents to $2.764. August crude oil tumbled $2.29 to $45.14/bbl.
Once the EIA report of a 39 Bcf storage injection rattled across trading desks, August futures reached a high of $2.841 and by 10:45 a.m. August was trading at $2.830, up 4.4 cents from Wednesday's settlement.
Futures traders spun the day's activity in a mostly positive light. "We bent the [support] line at $2.725, but holding that area there still shows that the base is still intact, especially since it rallied off that area and settled at $2.77," said a New York floor trader.
"It was an interesting day. The lower close may be saying we are seeing a market top. If nothing comes in fundamentally to give the market another push up, we may be seeing the end of the ride to the upside."
Inventories now stand at 3,179 Bcf and are 538 Bcf greater than last year and 599 Bcf more than the five-year average. In the East Region 22 Bcf was injected, and the Midwest Region saw inventories increase by 22 Bcf also. Stocks in the Mountain Region rose 4 Bcf, and the Pacific Region was lower by 2 Bcf. The South Central Region fell by 7 Bcf.
In physical market trading New England points showed the day's biggest moves with sharp downdrafts as the power market softened. Intercontinental Exchange reported next-day on-peak power at the ISO New England's Massachusetts Hub shed $12.40 to $42.16/MWh.
Mid-Atlantic locations were mostly mixed as next-day power changed only modestly. On-peak power at the PJM West terminal fell 65 cents to $50.24/MWh.
Next-day gas at points impacted by the fire and explosion of the Pascagoula Gas Processing Plant last week firmed. Flows from the Gulf hindered by the shuttered plant have returned to the level of 305 MMcf/d, with offshore liquid issues "resolved and valve work completed," Destin Pipeline reported late Wednesday.
The straddle plant, operated by Enterprise Products Partners LP, has been closed since last week following an explosion (see Daily GPI, July 5). Before the incident, the plant was processing about 400 MMcf/d.
Enterprise "continues to be unable to process gas" and has not indicated when services will resume, Destin said in a bulletin board posting. The shut-in has prevented Destin from providing gas transportation service "from all of its offshore receipt points.
Other market hubs tacked on double digit gains. Parcels at the Chicago Citygate rose 11 cents to $2.78, and gas at the Henry Hub was quoted up 10 cents to $2.85. Next-day gas on El Paso Permian rose by 15 cents to $2.52, and gas priced at the SoCal Citygates gained 12 cents to $2.59.
Prior to the release of the day's storage figures analysts weren't expecting much in the way of surprises. All indications were that the plump surpluses to both last year and the five-year average would continue to be whittled away. In that regard, the bulls were not disappointed. Last year, a hefty 83 Bcf was injected and the five-year pace stands at 77 Bcf.
"This week's report should be fairly straightforward," said John Sodergreen, editor of The Desk, a newly reformatted version of Energy Metro Desk." Next week, considering the holiday effect, should be a little dicey. Recall that last year, the two reports following the Fourth holiday (9th and the 16th of July reports) produced a pair of higher-than-expected reports out of EIA.
"Last week's weather was 22% warmer than the same week last year and 8% warmer than the five-year average. Since May, weather has been roughly 6-7% warmer than last year and the five-year average."
Sodergreen's survey showed an average 44 Bcf injection, as did IAF Advisors. Citi Futures Perspective calculated an increase of 46 Bcf and a Reuters survey of 16 traders and analysts revealed an average 43 Bcf with a range of 35 Bcf to 47 Bcf.
Gas buyers in the spot market had their hands full. Near-term weather patterns were expected to be challenging. "Hot and muggy conditions will persist across much of the southern two-thirds of the U.S. through the end of the week," the National Weather Service said Thursday morning. "Temperatures are expected to exceed 100 degrees, especially across western Texas, eastern New Mexico into Oklahoma. Scattered showers and thunderstorms will be possible from the central Gulf Coast to the Southeast and northward to the Mid-Atlantic region."