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Screen and Storage Nudge Spot Market Higher

Screen and Storage Nudge Spot Market Higher

Wednesday marked the first time in a week that double-digit moves were nowhere to be found in the cash market. Most points registered small gains of 2 to 5 cents, feeding off a strong futures screen and a bullish American Gas Association (AGA) storage report of a 26 Bcf injection.

The AGA report was well below industry expectations of a 35-40 Bcf injection and actually included an 11 Bcf withdrawal in the Producing Region. One trader, who harbored a guess of a 38 Bcf injection before the actual number was announced, said it would take a number below 30 Bcf to make an impact on trading. "Most everybody knows what is going on by now," he said. "The fact that everybody has been taking gas out of storage won't surprise anyone and has already demonstrated its impact through the futures screen. If the number comes out where people think it will, in the 38 Bcf range, the report won't have much impact. I think it would take a number below 30 to really grab people's attention."

The only point to register a decrease Wednesday was Transco Zone 6 (New York), which fell into the high 2.80s. "The basis was really inflated last week when Transco Zone 6 (NY) was trading at a 32- to 34-cent premium to the Henry Hub," one trader said. "Now it has settled in the plus-25 range on the shoulders of a strong futures market which has been able to soften the blow of lessening power generation demand." Other points in the Northeast fared better as M3 and Transco Zone 6 (non-NY) rose a few pennies to a nickel.

The largest gains of the day were seen in the Rockies, as Questar jumped into the high $2.10s. Although many sources said the screen was the main factor in the increases, one source added that continuing Aeco strength and the ending of the Opal maintenance helped support prices as well.

One western trader said business was back to normal Wednesday after PG&E lifted the high-inventory Operational Flow Order it placed on its system Tuesday. PG&E gained about a nickel into the high $2.60s and the Southern California Border rose into the low $2.60s.

In the Midwest, the Chicago market continued to feel very short, one trader said. It seems that several marketers have gone into the month short and that is causing Chicago to be very well bid. The Chicago citygate traded as high as $2.70 yesterday. Despite cooling temperatures, demand for gas on the Oklahoma intrastate pipes has remained strong as well. Almost across the board prices were up between 5 and 7 cents.

In the Gulf Coast, prices nudged up to index levels, one source said, but could not progress further. "Everything was up a little from yesterday, and the outlook seemed strong in the morning. But then I think the lack of power generation demand in the Northeast finally caught up to us and the move kind of halted. There seemed to be lots of gas out there."

Looking forward, one source was already feeling bearish about the next storage report, noting that a small injection this week will be an act unlikely to be repeated next week. "This week is turning out to be much cooler than last week. The need for gas was much stronger last week and that sets up some bearish situations for next week's storage report."

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