The previous day's dime drop by prompt-month futures combined with relatively moderate peak temperatures in several market areas to cause price declines at a large majority of locations Tuesday.
Only flat quotes at the Florida citygate, where Florida Gas Transmission (FGT) extended an Overage Alert Day (OAD) and tightened the imbalance tolerance (see Transportation Notes), and a couple of Western Canada points were left out of overall losses ranging from a couple of pennies to about 20 cents. The declines exceeding a dime tended to be concentrated in the Northeast, Midcontinent and West.
After being a negative influence on Tuesday's cash market, futures will provide a modest amount of support Wednesday after the September contract rebounded by 3.9 cents (see related story).
The remnants of Tropical Depression 5 dissipated after moving inland Tuesday morning along the western Mississippi Gulf Coast, the National Hurricane Center (NHC) said, but not before producing locally heavy rainfall and gusty winds that likely dampened some of the Louisiana-Mississippi area's potential power generation demand. Meanwhile, NHC began monitoring a tropical wave in the central Caribbean Sea during the day but gave it only a 10% chance of becoming a tropical cyclone during the next 48 hours as it moved generally westward at 10-15 mph.
Highs will continue to hit the mid 90s or higher Wednesday from Oklahoma and Texas westward through the desert Southwest. Otherwise most of the market is enjoying some respite from August heat with peak temperatures generally limited to the 90 area or lower prior to a return of torrid conditions in many areas.
Despite the continuation of FGT's OAD, IntercontinentalExchange (ICE) recorded only one deal for Florida Gas Zone 3 on its online platform Tuesday. The Zone 3 price was down nearly 15 cents in that sole transaction, ICE said.
Searing heat in the Lone Star State is causing the Electric Reliability Council of Texas to set further new records in power generation demand, but ICE volumes at the Katy Hub west of Houston plummeted from 707,700 MMBtu in 101 deals for Tuesday to 560,000 MMBtu in 80 deals for Wednesday as ICE's Katy pricing dropped a little more than a dime.
Kern River indicated that less than half of the available capacity at two delivery points into the SoCalGas system is being utilized. Wheeler Ridge has total volume of 885,000 Dth, but only 303,733 Dth was scheduled there for the Evening Cycle Tuesday, leaving 581,267 Dth available, Kern River said. And Kramer Junction, with 550,000 Dth of capacity, had only 214,450 Dth scheduled for Tuesday's Evening Cycle, leaving 335,550 Dth open.
Northern Natural-Ventura had Tuesday's biggest flow reduction in terms of percentage (down 28% by 260,000 MMBtu to 671,000 MMBtu), according to Bentek Energy's U.S. Natural Gas Hub Flows chart. However, it was edged out in actual volume by Texas Eastern M-3, which dropped 291,000 MMBtu to 2,458,000 MMBtu, or 11%, Bentek said. Somewhat curiously, while Ventura took the biggest percentage hit, Northern's demarcation point topped all other increases (except for Niagara's 78%) in rising 41%, or by 211,000 MMBtu to 721,000 MMBtu, the consulting firm said.
A marketer in the Upper Midwest said his area was cool for now but could expect a return of "major heat" before the end of the month. Despite a general lack of air conditioning demand, he bought a small amount of spot gas delivered to the MichCon Gas citygate on behalf of one client. The marketer reported that his company was getting a lot of calls from people interested in getting its help with participating in the Customer Choice programs for small customers of MichCon and Consumers Energy.
Currently there's very little weather-based demand along the Pacific Coast, a western trader said, adding that even inland California is unusually moderate. He noted that the SoCal citygate recorded one of Tuesday's largest drops. Despite the lack of load in California, the trader said, there is still a lot of San Juan Basin trading activity, but most of that gas is moving eastward to help handle the Midcontinent and Texas heat.
It's still too early for anybody to be talking about September business yet, he said.
Except for normal conditions for a strip along the East Coast southward from New Jersey through the Carolinas, the National Weather Service (NWS) projects above-normal temperatures during the Aug. 23-27 workweek everywhere east of a line from the Texas Panhandle through western Minnesota. The Tuesday afternoon six- to 10-day forecast also predicted above-normal readings in most of the desert Southwest extending northward into western Colorado and most of Utah. NWS looks for below-normal temperatures along the West Coast, extending into northern Idaho and the western end of Montana in the north.
IAF Advisors analyst Kyle Cooper looks for a storage addition of 30 Bcf to be reported for the week ending Aug. 13, which he said would be less than the year-ago and five-year average builds of 52 Bcf and 50 Bcf, respectively. Stephen Smith of Stephen Smith Energy Associates projects an even smaller injection of 26 Bcf, which he said was down from his original estimate of 28 Bcf.
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