With a little help from a 7.4-cent advance by July futures the day before, rising cooling load in some areas was able to lift cash prices at nearly all points Wednesday. Backsliding at a couple of Gulf Coast points and the Florida citygate kept gains from extending across the board.
A large majority of Wednesday's gains were in double digits as they ranged from a couple of pennies to a little more than 75 cents. The Chicago citygate, where temperatures are due to hit the mid 80s again Thursday, recorded one of the larger gains. It was beaten out for the biggest uptick, however, by Cheyenne Hub, from which Rockies gas is most easily able to flow eastward when demand picks up in the Midcontinent/Midwest market.
Although Rockies points were making sizeable rallies from their big drops on Tuesday, sub-$2 quotes continued for all but Cheyenne Hub Wednesday, and Kern River and Opal were still averaging slightly under $2.
For Rockies producers, it's likely to be a summer and fall of their discontent as basis blowouts like the one that occurred June 4 (and which have sprung up again to a lesser degree since then) are likely to continue occasionally until next winter, according to Bentek Energy (see related story). The problem essentially is limited takeaway capacity from the Rockies that is at times exacerbated by pipeline transport constraints, and the situation is unlikely to improve much until Phase II of the Rockies Express Pipeline comes on-line early next year, Bentek said.
Most of the southern tier of states continues to make the biggest contribution of power generation load to handle air conditioning usage, especially in the desert Southwest where daily highs will approach 110 degrees Thursday. The eastern end of the South is lagging a bit, though, with Atlanta expected to barely surpass 80. The Midcontinent and Midwest are chipping in a bit with peak temperatures scattered throughout the 80s, and even the Rockies are starting to heat up, with Denver due to go from a high of 73 Wednesday to around 83 Thursday.
It is the Northeast and northern West Coast that currently have the most moderate weather with highs unlikely to get above the low 70s.
Thursday's cash market will lack prior-day screen support after the July natural gas contract fell 7.4 cents Wednesday, giving back Tuesday's increase exactly to the tenth of a penny.
The most significant loss of about a dime occurred at Florida Gas Zone 3 as Florida Gas Transmission ended an Overage Alert Day.
On the other hand, PG&E's extending a high-inventory OFO through at least Thursday again had no negative impact on Northern California prices. Both the PG&E citygate and Malin were up nearly 20 cents.
A Calgary-based producer reported seeing a modest increase in Chicago cooling load, but he said the main reason for the citygate's sizeable gains was Alliance cutting Authorized Overrun Service (AOS) to zero Wednesday because of a compressor outage. "A lot of us had to scramble to re-place gas today [Wednesday]," he said, and there were quite a few intraday deals being done because "it was a sudden change" for June 13 flows.
It looks like zero AOS will last another day on Alliance, with the situation "probably" returning to normal Friday, the producer went on. He hopes it happens quickly because it looks like higher power generation load will last for a while in much of the Midwest, he said. Meanwhile, it's getting cooler around Calgary again, so any developing local cooling load has been squelched for the time being, he added.
Weather 2000 had a bullish prediction for gas prices in a Tuesday advisory. Noting that it was still nine days at that point from the official beginning of summer, the New York City-based consulting firm said the Midwest and Northeast are bracing for their third heat spell of the year already. "It's sometimes subtle, it's not the caliber of a blistering August heat wave, and they're interspersed by cool fronts [and] troughs; but the Great Lakes, Ohio Valley, Mid-Atlantic and Northeast are tallying up cooling degree days [CDD] and critical days at a very anomalous clip, ranging from double to triple last year's pace," Weather 2000 said. "Lo and behold, computer models say not a single day in the next 10 days will break 90 [degrees] in either Chicago or Cincinnati or the New York metro area. But you should know they of course all will break 90, as the old song of 2007 summer temperatures being underestimated plays on and on. As we progress deeper toward the summer, not only will hot afternoons be carrying the day, but warmer/muggier nights will also contribute more and more to these CDD surpluses (and dehumidification demand)."
A Reuters survey of 20 industry players found an average expectation of a 98 Bcf build in storage for the week ending June 8. Estimates ranged from 88 Bcf to 104 Bcf, the news service said, adding that inventories rose "an adjusted" 77 Bcf in the comparable week last year and the five-year average gain is 93 Bcf.
Bentek Energy weighed in with a projection of a 102 Bcf injection.
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