The cash market was showing growing signs of weakness as the mostly single-digit declines that had slightly dominated weekend numbers Friday got larger in nearly all cases Monday. Forecasts of peak temperatures ranging from around 90 to either side of 100 stretched from the South Atlantic area through Oklahoma and Texas into much of the desert Southwest, but moderate to cool conditions continue to reign in the rest of the U.S. and Canada.
The preceding Friday's futures dip, the absence of any tropical storm threat to Gulf of Mexico production, ample storage inventories and a general lack of cooling load as the summer season nears its end more than offset the normally slightly bullish return of industrial demand from its typical weekend fade.
Flat to a little more than a nickel higher numbers were confined to a few locations in California and the Southwest basins. The rest of the markets recorded decreases ranging from 2-3 cents to nearly a quarter, with most of the largest losses occurring at Rockies locations.
Chances of a cash rally Tuesday are highly dubious after October futures followed up Friday's loss of 3.8 cents with an even greater downturn of 20.2 cents Monday (see related story).
The National Hurricane Center (NHC) had quit monitoring Tropical Storm Karl following its Friday landfall in the vicinity of Veracruz, Mexico.
Hurricane Igor was still just barely qualifying for hurricane-level strength Monday as it churned northeastward through the cool ocean waters north of Bermuda. Igor's center was expected to stay away from the East Coast, but tropical storm-force winds might brush the eastern edges of Canada's Maritimes provinces. Julia was downgraded to a tropical storm over the weekend as it headed into the central North Atlantic, and NHC said it would not issue any more Julia advisories following the one Monday morning.
NHC was giving high odds (80%) of a low-pressure area about 450 miles west of the Cape Verde Islands becoming a tropical cyclone during the next 48 hours. The agency said the system, which has been designated 94L, continued to show signs of organization and had favorable conditions for additional development as it moved slowly northwestward Monday.
PG&E ended a high-inventory OFO during the weekend, which helped Malin and the PG&E citygate see slight support in falling less than 2 cents each, according to IntercontinentalExchange (ICE). However, citygate volumes traded on the ICE online platform plummeted from 987,700 MMBtu Friday to 681,500 MMBtu Monday. On the other hand, ICE activity at Malin was up sharply to 499,700 MMBtu Monday from 344,700 MMBtu for the weekend.
A small hint of potential firmness came from affiliated pipes Algonquin and Maritimes & Northeast, which both warned that forecasted high demand beginning Tuesday gave them limited operational flexibility and thus required restrictions on creation of negative imbalances.
Calling it a "pretty volatile" trading session, a Midcontinent producer said prices started somewhat strongly but came off in later deals to wind up with their daily losses. There is still some cooling load left in the Midcontinent market, he said, but it's a virtual certainty that supplier sales volumes will be dwindling noticeably by the start of October as more regions experience crisp fall weather.
The producer said his company begun a small amount of October business early. Late last week it was trading a few Midcontinent pipes at index plus 1-1.5 cent, but Monday morning picked up a Panhandle Eastern package at index plus 0.25 cent, which he though might indicate that October pricing was weakening slightly.
A Northeast utility buyer said his company is ready for the fall and winter, but with temperatures peaking in the high 60s it has yet to see any significant heating load. The utility is not topping off storage accounts quite yet, he added, but is "comfortably close to finishing."
The buyer reported some early bidweek basis numbers of Tennessee Zone 1 at minus 6 cents for both the 500 and 800 legs, and Dominion South Point at plus 7.5 cents. He emphasizes that he hasn't actually made any October baseload deals with those numbers yet, but said they are a sample of the offers the company is getting prior to bidweek.
After a very hot June through mid-August when Overage Alert Days (OAD) by Florida Gas Transmission (FGT) were frequent, a Florida trader said she liked that the market has been fairly quiet since the summer heat eased off a bit in the last half of August. There's still some cooling load around, but the lack of OADs has given her staff a little extra working room in trading.
That has come in handy, the trader went on, as maintenance has limited FGT's West Leg capacity within Florida in last couple of months or so, which has sometimes required traders to be creative in nominating around the West Leg allocations. However, "we've known it was coming" since the end of spring, she said, so it wasn't very difficult to avoid problems.
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