Cash Turns Sharply Downward in Storage Report Reaction

As NGI sources had predicted, the bearish revision of storage data Thursday and the screen's negative response had their cash impact Friday. Weekend prices sank in double-digit amounts at all points, with most declines measured at about a quarter or more.

Quotes for San Juan Basin and Northwest South of Green River took the biggest tumbles by far, falling by dollar-plus amounts. One trader attributed the San Juan plunge to the pending Saturday shift of Transwestern maintenance on its San Juan Lateral to the Blanco Hub-to-Thoreau segment, which will restrict about 610,000 MMBtu/d of San Juan supplies until normal capacity of 860,000 MMBtu/d is restored May 27 (see Daily GPI, May 5). The constraint caused a run on El Paso-San Juan service, forcing deep discounting of prices there, he said. However, because the Transwestern lateral's Ignacio-Blanco restriction ended Friday, that may provide more San Juan access to Rockies gas in the coming week, he concluded.

The price dive in Northwest's South of Green River segment was predictable after the pipeline announced that beginning Saturday (May 17) it would cut alternate nominations there as necessary to build up its storage account in the Jackson Prairie facility near the system's northern end (see Daily GPI, May 16), another source commented.

Air conditioning load was still strong through the Gulf Coast states Friday, but a stormy front moving southeastward into the South was leaving demand-dampening high temperatures maxing out only in the low 80s in its wake. The Pacific Northwest had chilly weather, including mountain snows, due to linger through the weekend, but most of the affected area is sparsely populated.

The 2,300 MW Comanche Peak nuclear power station operated in North Texas by TXU remained shut down Friday following a lightning strike Thursday to a connected high-voltage transmission line, according to a corporate spokesman. "We're undergoing system-by-system analysis" on when the two units can be restarted, he added, but there is no prognosis on a return to service at this point.

In another Texas supply/demand issue, an ExxonMobil spokesman said the company's 120 MMcf/d processing plant at Katy remained out of commission Friday after a fire-caused shutdown Tuesday. The major producer is assessing options for restarting operations, he said, adding that he was aware of industry speculation that the plant might not return to service at all, "but I can't comment on that." The spokesman said he could only say that the plant would stay offline at least through the weekend, if not longer.

Between the Comanche Peak outage and the earlier shutdown of the 1,250 MW South Texas Project 1 reactor that is expected to last until at least late summer, Texas power generation requirements may test state gas supplies this week, especially if the National Weather Service's forecast of above normal temperatures in the south-central states is correct. A western trader confirmed that nearly all Waha and Pemian Basin production continued to move eastward Friday "to feed those hungry Texas air conditioners."

Absent any compelling new price influences that might arise, a Gulf Coast marketer said he looks for the cash market to be "mostly trading sideways" through the first half of this week and possibly longer. Traders at Midcontinent and Midwestern points reported a moderate upward movement in late deals Friday, but didn't see that necessarily as an indicator of any significant rebound Monday.

A marketer who manages gas supply for several large end-users in the Midwest said he is still having trouble finding more available suppliers, commenting, "We missed a lot of opportunities last winter" due to the lack of market liquidity. "Everybody wants to capture the value of current gas prices while they're this high," he added.

Analyst Kyle Cooper of Citigroup said his initial estimation for this week's storage report is an injection "in the 80s [Bcf]." This would compare with a year-ago build of 68 Bcf and a five-year average injection of 77 Bcf. "The weather remains supportive and will likely support prices unless temperatures turn bearish," Cooper continued. "Based on our weather model, the eastern consuming region has seen 12 consecutive bullish months of weather. The longest prior consecutive stretch was [eight] bearish months in 1998."

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