Finding a bit of developing heating load in the Northeast combined with continuing power generation demand for air conditioning use from the western end of the South through the desert Southwest, prices realized mostly moderate advances at most points Thursday. A modest 2.6-cent gain by June futures on Wednesday also contributed a little support to the cash market.
A solid majority of points ranged from flat to up a little more than 90 cents, but outside San Juan Basin the gains were capped at around 15 cents (Sumas) or C20 cents (Westcoast Station 2). A couple of small losses in the Midcontinent and East Texas joined larger ones of up to about 30 cents in the Rockies in going against the overall market grain. The Rockies are averaging below $4 now, and a Questar quote fell as low as $2.95 as weather-based load has nearly disappeared in the region. A return of San Juan Basin supplies from a major maintenance constraint also cut into demand for Rockies gas.
In reporting a storage injection of 95 Bcf for the week ending May 11, the Energy Information Administration met consensus expectations that had centered around the mid to high 90s Bcf. Though nominally bearish in comparison to the five-year average build of 77 Bcf for the comparable period, traders of the Nymex natural gas contract hitched a ride on the coattails of soaring petroleum product futures in sending June gas 18.5 cents higher to $8.075. It was the first prompt-month settlement above $8 since Dec. 1, 2006 (see futures story).
Futures also were nudged higher by a new forecast from AccuWeather meteorogist Joe Bastardi's team that this summer will be hotter than normal (see related story).
Besides the usual support that the cash market derives from a sizeable prior-day futures advance, there should be an extra technical boost for physical gas this time because the June contract finally was able to vault past the psychological $8 level and stay there this time, one source said.
Although El Paso had to extend a total outage of the San Juan Crossover through at least the first and second nomination cycles Friday (see Transportation Notes), San Juan Basin traders celebrated the approaching end of having no capacity on the crossover with spikes of a little more than 90 cents in El Paso's Bondad pool and about 75 cents in the Blanco pool.
A cold front will keep New England temperatures limited to the 40s at least through Friday, which makes it a virtual certainty that furnaces are getting turned on again in the region. However, cooling load has eroded tremendously in the eastern South, with Atlanta, Birmingham, AL, and Charlotte, NC, forecast to barely make it above 70 degrees Friday.
Cash prices will keep ramping up Friday based largely on the strongly positive guidance they got from Nymex traders Thursday, a Texas-based marketer confidently predicted. He expects futures to remain above $8 for a good while. And storage injection purchases likely will accelerate a bit based on the predictions for both a hot summer and an active Atlantic hurricane season, he said.
The marketer said he found Thursday's trading "slow" due to muted volatility. He reported seeing a little bit of heating load resurfacing in the upper Northeast with a wet cold front due to linger into the weekend. All of his company's retail loads were up there, he said. Earlier this month the company was selling only gas that it already had under contract, he added; now it's buying spot gas for resale to meet the demand of retail customers.
The marketer said the Chicago citygate is already trading for June at basis of minus 8.5 cents.
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