Heat levels forecast for Wednesday are rising by sufficient amounts in enough areas to produce rising prices at most points Tuesday. July futures continued to buck the trend by dropping another 6.3 cents Tuesday.
Also going against the grain by slumping lower were prices in the Rockies, where temperatures have cooled off considerably and where excess supply and limits on transport capacity is creating a supply excess. Denver, which came close to breaking the 100-degree mark as recently as Monday, was due to peak around 80 on Tuesday and Wednesday.
Northeast citygates were the clear leaders in overall price gains ranging up to half a dollar. Most of the non-Northeast increases were fairly moderate in topping off around 17 cents.
Extra supplies that struggled to find a home again depressed the West in general and the Rockies in particular. Besides moderating weather reducing regional demand, PG&E kept a high-inventory OFO in place for Wednesday with the same conditions as on Tuesday. Kern River reported that linepack had decreased by 50,000 Mcf Monday, but linepack "is still posted as high systemwide and some parties continue to bank on the system. All shippers and operators must take delivery of gas brought on the system until the linepack returns to normal."
Northwest applied a Declared Deficiency Period to shipments through the Muddy Creek North Constraint Point as it investigates pipe anomalies through Friday in the vicinity (see Transportation Notes).
Although Northeast prices had been flat to weaker in most cases Monday, the U.S. Natural Gas Hub Flows analysis by Bentek Energy (http://intelligencepress.com/features/bentek/) shows how regional demand was already building rapidly. Volumes for Tuesday flow at Texas Eastern M-3 were up a whopping 364,000 MMBtu/d, or 25%, while Tuesday nominations at Transco Zone 6-New York City rose by 205,000 MMBtu/d, or 14%, Bentek said.
Even with upticks in most of the market Tuesday, all points but one are trading well below first-of-month indexes. Questar was the only point earning a premium of about 40 cents above index. All others are seeing deficits of a quarter or more from index.
For a Midcontinent marketer, it was definitely the heat that had spot prices on the rise despite the fact that July futures continued their losing ways both Monday and Tuesday. Daily cash quotes on Tuesday got above the levels his company was trading for July, "so we were pulling gas out of storage" to meet the needs of power generation customers.
Bidweek prices were generally pretty flat from Monday, the marketer continued, largely because the screen was little changed until near the end of the day. After weakening a bit on Monday, Chicago citygate basis for July tightened to minus 9 cents Tuesday, he said, adding that was probably a result of continuing weakness in July futures.
A Calgary-based producer said storage inventories had gotten to about 80% full in Alberta, and that's going to start limiting where provincial production can be placed in the near future. "We need a couple of hurricanes," he said, or this market is going to start seeing prices with a 5 in the dollar place. Referring to significant summer heat, he said, "We're getting there, but only slowly."
Ron Denhardt of Strategic Energy & Economic Research expects the Energy Information Administration to report an 88 Bcf addition to storage in the week ending June 22. Broker Jay Levine of enerjay, LLC weighed in with an 86 Bcf estimate.
SunTrust Robinson Humphrey/the Gerdes Group commented that as power generation demand for gas ramps up this summer, "gas prices below $7/MMBtu should encourage further fuel switching from residual fuel oil to natural gas and provide additional support to the gas contract. Given current prices, natural gas is trading at a $1.70 discount to residual fuel after adjusting for the environmental, storage and transportation costs associated with each fuel."
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