The modest Midwest warming trend that had helped boost most of the market slightly a day earlier proved to be short-lived, and so did the small rally as prices fell at a majority of locations Thursday.
A few flat to barely higher points, primarily in the Midcontinent, were exceptions to overall softness. As it has done often during August, the Florida citygate again turned up its nose at general price trends in spiking by about 75 cents as Florida Gas Transmission greatly tightened the imbalance tolerance on an Overage Alert Day (see Transportation Notes).
Generally the cash market paid more heed to a prior-day downturn of 2.8 cents in prompt-month futures and the fact that Midwest highs were due to fall again Friday after a modest midweek advance. Most losses were in single digits in ranging from 2-3 cents to about 15 cents.
The Energy Information Administration's report of a 27 Bcf storage injection for the week ending Aug. 13 fell a bit short of consensus expectations of around 30 Bcf. Although the actual volume was well short of the 50 Bcf five-year average, Nymex traders were skeptical of the report's seeming bullishness and instead sent September futures to a decline of 6.8 cents (see related story).
SunTrust Robinson Humphrey analysts noted Thursday that storage "is all but guaranteed to surpass 3,000 Bcf this week, which would mark the second earliest breach of this level on record (last year storage surpassed 3,000 Bcf in late July)." They added that the speed at which storage has filled in 2010 is "particularly astonishing" considering that cooling degree days have been more than 25% above last year and more than 15% above the long-term average.
A tropical wave had moved into the western Caribbean Sea Thursday, but there were no signs of development, said the National Hurricane Center (NHC), which still saw little chance of it strengthening significantly before moving over Mexico's Yucatan Peninsula and Central America Thursday night and early Friday. As of Thursday morning the agency was not monitoring any other Atlantic tropical activity, but that afternoon it began coverage of what it called "a large area of disturbed weather" extending from the West Coast of Africa to south of the Cape Verde Islands. Though the system was disorganized, environmental conditions appeared favorable for "some development," said NHC, which gave 20% odds of it becoming a tropical cyclone during the succeeding 48 hours.
Midwest highs were forecast to fall back into the low to mid 80s Friday, while much of the Northeast could expect an almost imperceptible increase of two to three degrees but mostly stay below 90. Temperatures were mostly holding steady in the South and West.
The reopening of Tennessee's Big Muskie receipt interconnect with Rockies Express (REX), which is just upstream of REX's Clarington Hub terminus in eastern Ohio, has resulted in a great surge of trading there on IntercontinentalExchange (ICE). Although volumes there skyrocketed from 54,500 MMBtu Wednesday to 247,600 MMBtu Thursday, the price fell just shy of a nickel, ICE said.
And although the PG&E citygate recorded an even greater trading spike from 579,500 MMBtu in 71 deals Wednesday to 786,700 MMBtu in 99 deals Thursday, prices there fell similarly by about a nickel, ICE said.
Panhandle Eastern remained well to the rear of the Midcontinent price pack after falling about a nickel to the mid $3.60s, ICE said.
Although Chicago citygates rose by 3 cents Wednesday, Bentek Energy's U.S. Natural Gas Hub Flows chart showed that nominated volumes for delivery to Chicago Thursday saw one of the biggest drops, slipping by 249,000 MMBtu, or 12%, to 1,781,000 MMBtu.
A Midcontinent producer said his area would continue to reach the upper 90s for the most part at least through the coming week before a brief cooldown arrived (which in his case meant the low 90s).
The big news for Midcontinent producers is the basis blowout, he continued. It's back to minus 70 cents relative to the screen on Panhandle Eastern for September "and moving out rapidly." Don't be surprised if you begin hearing rumbles of September curtailments and shut-ins next week, he said. This could put some added pressure on the storage refill as the market heads into a shoulder period, "especially if we get late heat," the producer added.
At this point it looks like Midcontinent pipes will be priced under $3.50 next month, he said. Panhandle Eastern basis is trading around minus 73 cents for September, he reported.
A utility buyer in the South, noting that his area is experiencing one of the market's highest heat levels outside Texas and the desert Southwest, said that means power generation load is staying strong. The forecast calls for no substantive break in the heat until September at the earliest, he said.
The buyer said he is unlikely to make any September baseload purchases because the company will still have summer term deals in effect and expects to have storage accounts essentially full by the end of August.
A little generation load has been building because of recent heat, but it won't last long, said a Midwest utility buyer. A forecast of Friday rain should cool things off a bit, he said. However, there may be a fair amount of weekend power generation load as peak temperatures reach 88-90 degrees again Saturday and Sunday, he added.
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