It definitely appears that the bloom is off the price rose that was sustained through much of September despite generally weak weather fundamentals. Only small gains at a few Rockies points were left out of declines everywhere else in trading that began the final week of September on Monday.
It's hardly surprising to see a weak market when even Texans are waking up to much cooler temperatures than they've experienced since last spring. Only the desert Southwest has any appreciable high heat levels left, although California's coast is warmer than normal, with Los Angeles expected to approach 100 degrees Tuesday after setting a record high for the last 20 years at 105 Sunday.
Only a few price averages, mostly in the Northeast and to a lesser extent in the Midwest, were still topping $4 Monday as a large majority of points fell by about a nickel to C25 cents or so. Westcoast Station 2 was trading at less than C$3 for the entire day. All of the several points that were flat to a little more than a nickel higher were in the Rockies.
Negative screen guidance for cash prices will continue Tuesday after October futures fell another 8.1 cents in their penultimate day of trading (see related story).
Cooling load is nearly nonexistent after a cold front moved across the eastern U.S. during the weekend and brought much lower temperatures to the South, where much of the nation's remaining heat had been residing. Few areas are expected to exceed the mid 80s Tuesday.
Tropical Storm Matthew dropped off the National Hurricane Center's (NHC) monitoring chart after entering Central America early in the weekend. It had been replaced as the center of interest for offshore producers by a broad area of low pressure in the northwestern Caribbean Sea that NHC gave a "medium" chance (40%) of becoming a tropical cyclone within the following 48 hours. A small slow-moving low-pressure system about 800 miles west-southwest of the Cape Verde Islands Monday afternoon had low odds (10%) of developing soon, NHC said.
Later Monday NHC was tracking another low-pressure area, which it said was the remnant of Tropical Depression Julia, about 350 miles southeast of Bermuda and moving westward at nearly 15 mph. However, it again saw a low chance (10%) for this system's development.
IntercontinentalExchange (ICE) reported that although Texas Eastern M-3 prices fell more than a dime, trading on its platform at that point jumped from 225,700 MMBtu for the weekend to 323,000 MMBtu Monday. ICE also said volumes at the Katy Hub west of Houston soared from 461,300 MMBtu Friday to 626,400 MMBtu Monday even as average pricing dropped about 15 cents.
A Rockies producer noted that Monday's tightening of CIG-Henry Hub basis to about 37 cents (CIG rose nearly 3 cents while Henry fell a little more than 15 cents) was the lowest spread since May. It's good to see the basis differential tighten, he said, but tough to have Rockies prices stay well below $4, because profits are negligible to near-negative at those levels.
After a relatively mild summer, temperatures are above average in much of the West, the producer said. He found the recent downturn of 15 in the U.S. gas rig count encouraging for gas prices in the intermediate term, but said even more encouraging was more than 100 rigs departing the Canadian oil and gas search recently.
Currently, the Niobrara oil shale is the big story among Rockies producers, he said; for now natural gas is kind of an afterthought for them.
ICE indicated slipping October bidweek prices, saying its Chicago citygate average of $3.96 Friday was down to just shy of $3.85 Monday. It reported a similar drop at the PG&E citygate from nearly $4.16 to about $4.06.
Fifteen drilling rigs quit the U.S. search for natural gas during the week ending Sept. 24, according to the Baker Hughes Rotary Rig Count. Nearly all of the departures -- 14 -- occurred onshore, with only one rig leaving in the Gulf of Mexico. The latest Baker Hughes tally is down 1% from a month earlier but 36% above the year-ago level.
Commenting on the "extreme rain" idling 101 rigs in Canada over the past two weeks and the stall in U.S. gas rig count growth, Citi Futures Perspective analyst Tim Evans said it "suggests that U.S. natural gas producers may have gotten the message that the downtrend in forward prices has been sending, cutting back a bit on production plants in order to rebalance the market."
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