Prospects of a significant heat wave in the South later this week, along with the growing likelihood of a tropical storm that could enter the Gulf of Mexico, caused mostly small gains at a large majority of locations Tuesday.
Nearly all of the increases were in single digits in ranging from 2-3 cents to about 15 cents. A spike of more than $1.50 at the Florida citygate, where an Overage Alert Day by Florida Gas Transmission has been in effect for two weeks now, was way outside the general market trend. Numbers that were flat to a couple of pennies lower were most prevalent in western markets.
Expected increases in air conditioning load, along with the rebound of 8 cents Tuesday by August futures (see related story) and the potential storm threat to offshore production, are likely to keep most of the cash market on the rise Wednesday, one source said.
A tropical wave farther to the west in the Caribbean Sea had dissipated overnight, but the National Hurricane Center (NHC) was giving significantly increased odds (60%) of another "vigorous" tropical wave having favorable environmental conditions for developing into a tropical depression or tropical storm with the following 48 hours. Showers and thunderstorms associated with the wave extended from the northern Leeward Islands to Hispaniola Thursday afternoon, NHC said. It was expected to move toward the west-northwest at about 10 mph.
Highs in the low to mid 90s will be common Wednesday from Oklahoma and Texas through the South Atlantic coast and are expected to keep rising slowly as the week continues. New England will be mostly on the mild side, but peaks in the 90 area will continue in the lower Northeast and get closer to 100 in parts of the Mid-Atlantic, The Weather Channel said.
The Midwest is due to warm slightly but stay fairly moderate with peaks limited to the mid 80s. Meanwhile, the desert Southwest is the only seriously hot section of the West, with most of the rest of the region having a forecast of cool to moderately warm.
Kern River said linepack had returned to normal Tuesday after being below minimum target levels in the last few days.
Some weather predictions are starting to get "intensely hot" again, said a Midcontinent producer, and it looks like that will continue through at least the end of the week. He reported getting intraday supply orders from some industrial end-user buyers, which resulted in pretty constant demand throughout the morning with no dropoff in prices.
The producer said his perception was that some storage holders have begun liquidating inventories a bit into what looks like a firming market, with hopes of reinjecting the gas at cheaper prices later. He said the Midcontinent has gotten very little rain since the remnants of Hurricane Alex faded earlier this month, and that is contributing to gas-fired power generation demand.
"Pretty much every industrial customer is in the hunt for gas" currently, the producer added, saying he had seen quite a few of them looking for term contracts in requests for proposals in order to lock in prices for a while.
There's not much weather-based demand in the West for now, said a Rockies producer, who noted that CIG basis relative to Henry Hub had widened slightly to about minus 78 cents Tuesday after holding pretty steadily at minus 75 cents in recent weeks. He said production flows from Western Canada into the Rockies had been increasing recently, which tended to limit any potential Rockies price hikes.
Conditions were on the cool side Tuesday in Denver after the metro area recorded a date-specific record high of 102 last Saturday, the producer said. He is hoping that a forecast heat wave late this week in the Southeast, when peak temperatures are expected to approach the century mark, will give a boost to the overall cash market. At the very least such heat levels ought to encourage more fuel-switching to gas, he said.
The National Weather Service (NWS) predicts above-normal temperatures during the July 26-30 workweek extending from most of the East Coast (excluding upper New England and the Florida peninsula) into much of East Texas and all of Oklahoma at the southern end and into southeastern Montana, all of Wyoming and most of Colorado at the northern end. The only area where NWS looks for below-normal readings is along the southern half of the California coast.
Stephen Smith of Stephen Smith Energy Associates projects a report of a 57 Bcf storage build for the week ending July 16, which he said was up from a previous estimate of 53 Bcf. SunTrust Robinson Humphrey analyst Cameron Horwitz looks for a 53 Bcf build, saying his lower week-on-week estimate is largely attributable to a 4 Bcf/d weekly jump in gas-fired power generation.
Ron Denhardt of Strategic Energy & Economic Research predicted a 54 Bcf addition to storage.
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