Prices continued Thursday a streak of mixed daily movement that began about three weeks ago, but there were signs of growing weakness setting in that likely means all points will be united in declines Friday. Cooling load was still fairly high in the South and growing significantly in the Northeast, but dropping drastically in the Midwest and much of the West.
The Gulf Coast again was close to flat in most instances, but double-digit changes in both directions were more common in other areas. Quotes ranged from about 40 cents lower to 20 cents or so higher. Northeast citygates and still-recovering Rockies points recorded all of the largest advances. However, Rockies market averages are still averaging less than $3, leaving a deficit of $5 or so from most Gulf Coast points.
The Midcontinent/Midwest market joined the non-Rockies West in seeing the greatest softness. The Chicago forecast helps illustrate why Midcontinent/Midwest numbers were so weak: after recording a high around 93 Thursday, the Windy City is due to peak about 15 degrees lower in the high 70s Friday.
On the other side of the weather coin, Northeast citygates rose by a dime or more in most cases as a major warming trend approaches. New York City's high of about 73 Thursday is scheduled to be replaced by one about 20 degrees higher Friday.
The Energy Information Administration was close but slightly to the high side of consensus expectations when it estimated a storage pull of 110 Bcf for the week ending June 1. Nymex traders ignored significant strength in the nearby petroleum product trading pits and treated the storage report as bearish, sending July natural gas futures 25.5 cents lower to $7.825, ending the reign of $8-plus daily settlements at three days.
One signal of increasing western price weakness came from Kern River, which, after enjoying a couple of days of normal linepack systemwide, reported high linepack Thursday in its two (of four) farthest downstream segments. And there is a good chance that PG&E, which ended a high-inventory OFO Thursday after it had been in effect only one day, will issue a new OFO for Saturday because its Pipe Ranger bulletin board projected Thursday that linepack will begin exceeding maximum target levels over the weekend.
Muggy weather in the Midcontinent should translate into a fair amount of local power generation demand, said a regional producer, but prices were coming off quite a bit anyway because cooling load in the Midwest market area is nearly disappearing Friday. "Every time I tried to do a deal, the numbers were lower," he said. However, there were sizeable spreads from west to east in the Midcontinent, though, with the east-side pipes significantly stronger because they can more easily move gas to pipes serving the Northeast market, he noted.
For example, he said, CenterPoint-East was trading nearly 20 cents higher than the pipeline's West pool, so since he could find little demand in the Midwest market area, he made some money playing off the east-west spreads in the production area.
It was hot Thursday in the Upper Midwest, said a marketer in the region, but temperatures should be quite comfortable this weekend. Also, regional cooling load has been tempered by cool nights, she added. Her company hasn't bought any spot gas all week, but likely will be in the market Friday expecting lower prices. It's pretty sure that the sizeable drop in futures Thursday will result in cash weakness Friday, she said.
A West Coast trader said he has been busy in the past couple of weeks traveling to set up some term deals. "Nobody wants [to commit to buying] a big chunk of gas," he said, "they're just taking little bites." They want to buy at the absolute bottom price and stay away from the high, of course, but they don't have much patience, he said, adding, "If the market's screaming, they act like Chicken Little and say, 'Protect me.'"
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