Gradually increasing heat levels in the interior West and Southeast proved insufficient Thursday to keep most of the cash market from continuing a slide that had begun two days earlier. The Rockies again were at odds with the overall trend by making gains ranging from a little less than 15 cents to nearly 35 cents.
Light cooling load in northern market areas combined with the previous day's futures dip of 12.8 cents produced cash declines from about 3 cents to nearly 40 cents. Whereas Wednesday's trading had hinted at a bit of strength returning to the physical market (smaller losses that were mostly in single digits and an increase in flat to higher numbers), greater weakness was the rule Thursday as nearly all price drops were in double digits and only the Rockies continued to rise.
Further softness is likely Friday due to cooling load remaining modest in several areas, the screen falling again Thursday and the weekend loss of industrial load coming into play. However, a rally is considered likely Monday as a heat wave engulfs much of the nation. It will be particularly hotter than normal in key consuming areas from the Midwest through the Ohio Valley, Mid-Atlantic and Northeast, according to the Weather 2000 consulting firm.
The Energy Information Administration's estimate of an 89 Bcf addition to storage in the week ending June 15 dovetailed nicely with most prior expectations. Although Nymex traders initially had a modestly bullish response, pushing the July natural gas contract to a little more than a dime higher at one point, selling ensued later and the contract ended the session 4.3 cents lower.
Questar recorded one of the day's biggest gains largely due to its Clay Basin storage facility returning to full injection capacity Friday following a one-day compressor outage that had reduced the capacity by 85,000 Dth/d Thursday (see Daily GPI, June 21).
It's a pretty quiet market currently, a Northeast marketer commented. His region had one day of significant heat on Monday, but temperatures have been falling since then, he said. Basis spreads have tightened, he said, noting that Henry Hub was about 70 cents lower than the Algonquin citygate on Tuesday, but that had shrunk to about half a dollar Thursday. It's only two to four degrees above normal in the Northeast currently, but significant heat in the last week of June should boost prices again, he added.
The marketer said he hadn't seen anything getting done in July business so far. There's a lot of suppliers wanting to make sales for July already, but buyers are tending to hold back for now, he said.
A Midwestern utility buyer said prices are looking softer for the weekend, but he agreed that the extensive heat wave predicted for next week should rally the cash market.
He is one of the buyers who already is trading July gas. With futures going lower this week, "we've been locking in a lot of July gas," he said. In fact, he has most of his intended baseload purchases already in place. He didn't do any July business Thursday, but reported that earlier this week he was buying Northern Natural-demarc supplies at basis of minus 72 cents. He said he had seen some bids for demarc at index minus 0.25-1 cent, but no buyers were hitting those bids yet .
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