Depressed by a dearth of weather-based demand and given negative guidance by two previous days of futures losses, the cash market continued to see mixed price movement Wednesday that nevertheless signaled growing weakness. The impressive Rockies spikes of Tuesday gave way to even larger losses in most cases Wednesday, while most other points recorded considerably more moderate declines.
Most of Wednesday's drops were in single digits as they ranged from 2-3 cents to a little more than 65 cents. Otherwise, a few scattered points were flat to a little more than a dime higher.
For a while Wednesday futures traders indicated that the string of losses by the June natural gas contract might end by making a foray into slightly positive territory. However, it was not to be as the contract ended the day with a loss of 4.4 cents despite moderate firmness by Nymex's petroleum product offerings.
Three pipelines have indicated problems with excess linepack. PG&E will have a high-inventory OFO in place Thursday, while Columbia Gulf has banned creation of positive imbalances and called on shippers holding such imbalances to eliminate them as soon as possible to avoid OFOs (see Transportation Notes). And Southern Natural Gas, noting that the Memorial Day weekend is historically a period of low demand on its system, said based on current scheduled supply and projected demand, it could exceed maximum storage injection capacity beginning Friday. It was "too close to call" whether a Type 6 OFO would be issued for long imbalances Friday but one was "highly likely" Saturday, the pipeline said.
Temperatures going into the last few days May remain too moderate in most sections to support much of either cooling or heating load for gas. Although the Northeast will join a good chunk of the South in seeing highs in the 80s Thursday, the peak temperatures will be limited to 84-85 degrees or so. A strong cold front will be cooling off western sections of the Midwest, but the region will continue to record peaks from the low to mid 80s in such population centers as Chicago, Detroit and Columbus, OH. Seasonal weather will dominate in the West.
The Rockies are in the process of warming again after a brief burst of chilly weather. Denver, which was expected to see a low just under 40 degrees Wednesday, should see that low jump to around 50 Thursday to combine with a high in the low 70s.
A Midcontinent trader said he could see "nothing exciting" in the daily market other than it just looks pretty soft for now.
The trader said he had already gotten most of his June baseload business done at index and had only a few last-day settlement basis deals left to complete. His company wanted to a jump on the traditional bidweek because it was aware of a lot of trading counterparties that will get a half-day off Friday, he said, while others will be taking a vacation day then to combine with the Memorial Day holiday for a longer weekend. Those working only a half-day will concentrate on getting weekend spot deals done, so he expects little if any bidweek deals to be traded Friday. "We don't want to get stuck" with possibly limited trading options following the holiday, he added.
The trader expressed puzzlement over apparent weakness of Panhandle Eastern for June. The pipe was being bid at index minus 4 cents and offered at minus 3 cents Thursday, he said. That seemed unusually weak when compared to actual deals getting done on ANR-Southwest at index plus 0.5-1 cent, he said. He was seeing Panhandle Eastern basis for June at minus 84 cents (it averaged basis of minus $1.235 in NGI's May bidweek survey). Chicago citygate basis had weakened to minus 11 cents Wednesday since a report of minus 8 cents late last week, the trader noted.
The National Weather Service (NWS) expects above-normal temperatures in the post-Memorial Day period in all of the U.S. outside Oklahoma, Texas and the Deep South. In its six-to-10-day forecast posted Wednesday for May 29-June 2, the federal agency predicted above-normal conditions throughout the West and everywhere north of a line running eastward along the Oklahoma-Kansas border, then dipping through central Arkansas into northern Mississippi, central Alabama and central Georgia before hitting the Atlantic Coast at the Georgia-South Carolina border. NWS looks for below-normal readings only in peninsular Florida; in the southern, central and southeast sections of Texas; and in a thin strip along the Louisiana coast.
Ron Denhardt of Strategic Energy & Economic Research estimates that a 100 Bcf storage injection will be reported for the week ending May 18.
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