Mild to cool weather is dominant, but most points realize small gains.
Despite the previous day's futures drop of 8.1 cents, the continuing lack of any credible tropical storm threats and substantive cooling demand having disappeared almost everywhere except in the southwest corner of the U.S., prices were flat to about C20 cents higher Tuesday. However, only White River Hub, Emerson and the three Western Canada price points saw increases of more than about a nickel.
Several scattered locations continued to soften between 2-3 cents and a little more than a dime.
Wednesday's September-ending cash market will have a small amount of futures support after the October contract expired with a gain of 3.7 cents (see related story).
The market achieved its mini-rally even after having lost a large majority of its meaningful cooling load outside Southern California and parts of the desert Southwest and Rockies. From the South Atlantic and Mid-Atlantic coasts through Texas and Oklahoma, almost no locations are currently getting above the mid 80s and overnight lows in the 50s and 60s have become much more common since the weekend.
It was unlikely that many furnaces were getting fired up to any significant extent yet in that region, but a Houston source said he couldn't recall whether his home's air conditioner had cycled on at all since Sunday afternoon and it was definitely on the nippy side when he went outside to fetch the newspaper Monday and Tuesday mornings.
A broad area of low pressure over the northwestern Caribbean Sea was upgraded to Tropical Depression 16 (TD16) Tuesday morning by the National Hurricane Center (NHC) and was just a little short on sustained wind speed of qualifying for the title Tropical Storm Nicole, which it was expected to either overnight or Wednesday. However, TD16's projected tracking to the north-northeast would keep it away from the Gulf of Mexico (GOM) production area. The system was expected to pass over the southeast side of Florida's lower peninsula, where NHC said it had the potential to become a tropical or subtropical cyclone before merging with a frontal system in that area by late Wednesday. First, though, TD16 was likely to weaken while negotiating the hilly terrain to the east of central Cuba Tuesday night.
As of Tuesday morning NHC was still keeping an eye on the remnants of former Tropical Depression Julia to the south-southeast of Bermuda, but they disappeared from the agency's Atlantic map during the afternoon. Instead, NHC began checking out a tropical wave in the central Atlantic about 1,300 miles east of the Windward Islands but gave it low odds (10%) of becoming a tropical cyclone during the succeeding 48 hours. NHC had ceased monitoring another system that was west-southwest of the Cape Verde Islands as of Monday afternoon.
Weather 2000 said TD16's lifespan would be limited as it gets absorbed Wednesday by fronts over southern Florida but noted that since 2002 even "subtropical" storms are given names. But "regardless of model innuendo or forecaster rumor, hemispheric physics are keeping [tropical storm] entities south or east of the GOM," the consulting firm said in a Tuesday morning advisory.
Weather 2000 added that with summer having concluded, people should be aware that October is a transition month "independent of winter." October and May are typical months for forecaster "spin" as impacting weather fades, the forecaster said, and in October "coolness" actually becomes a heating degree day, and no longer a cooling degree day, topic.
It wasn't especially surprising that the Houston Ship Channel was among the few points still a bit softer, considering how much August's torrid heat in Texas had faded to mostly mild to cool conditions. However, IntercontinentalExchange (ICE) reported that Ship Channel trading on its system had increased from 445,700 MMBtu Monday to 556,000 MMBtu Tuesday.
A Houston-based marketer acknowledged that local conditions are "nice now" but said area residents are almost certain to get a little sweaty again once or twice before winter officially arrives.
He said he didn't hear anything about potential "storm hype" helping revive the cash market -- even if to just a small extent -- in the face of widespread moderate weather. Instead, he thinks most people consider gas a bargain fuel; also, he said, a lot of traders likely were focused on finishing October bidweek business Tuesday and didn't want to spend much time haggling over daily prices.
The marketer said $3.93 was his estimate of NGI's Chicago citygate index for October, which would be up 18 cents from the September average.
ICE offered some degree of affirmation to the marketer's index assessment. After noting a drop in its Chicago average from about $3.96 Friday -- when nearly half of the bidweek trading so far on the ICE system occurred -- to about $3.85 Monday (see Daily GPI, Sept. 29), ICE said the citygate was back up around $3.90 Tuesday with about the same volume as on Friday.
The SoCal border was showing a similar pattern, dropping from about $3.85 Friday to the $3.73 area Monday before rebounding to nearly $3.79 Tuesday, ICE said.
A Midwest utility buyer said currently the market is in slow "in-between" times for his company. Though chilly at night, local weather was not cold enough yet for substantive heating load, but it can't expect heavy agricultural drying load to begin until about mid-October.
Although early last week NGPL had not expected any restriction on receipts from Trailblazer resulting from a unit outage Sunday at Compressor Station 106 in Gage County, NE (see Daily GPI, Sept. 22), the buyer said his utility was experiencing some scheduling headaches from impacts on the transportation of receipts from south of Station 106 for delivery north of it (including storage). Sometimes it's necessary to adjust nominations to cope with the restrictions, which he understands are now expected to last until Oct. 8, he said.
He reported purchasing a small package of October baseload at Northern Natural-demarc for index minus 0.5 cent, and a larger amount at Northern Natural-Ventura for index minus 0.75-1 cent.
A marketer in the Upper Midwest said area highs in the low 60s and 40s lows overnight may have some residents turning on their furnaces, but she didn't think it was many. As far as she could tell, company customers didn't seem to have any space heating needs at this point.
The company was nearly finished with bidweek deals, she continued, but still had a little more to buy Wednesday. Quoting October last-day basis purchases at plus 23 cents into MichCon but only plus 10.5 cents into Consumers Energy, she remained puzzled about why MichCon continued to command major premiums over Consumers pricing, saying the latest spread is about the largest she could remember. She said she was not sure if MichCon might be having pipe problems limiting deliveries into its system.
Stephen Smith of Stephen Smith Energy Associates said he is now projecting a storage build of 67 Bcf for the week ending Sept. 24 -- up slightly from an original estimate of 65 Bcf. Strategic Energy & Economic Research's Ron Denhardt and Kyle Cooper of IAF Advisors weighed in with slightly smaller estimated increases of 64 Bcf and 63 Bcf, respectively.
Extending his storage predictions by an extra week for a change, Citi Futures Perspective analyst Tim Evans said he looks for injections of 71 Bcf in each of the weeks ending Sept. 24 and Oct. 1, to be followed by additions of 82 Bcf and 69 Bcf in the weeks ending Oct. 8 and 15, respectively.
Cameron Horwitz of Canaccord Genuity agrees with Evans' expectation of a 71 Bcf refill in the upcoming report, attributing the small decline from the previous week's 73 Bcf due to a slight week-on-week increase in gas-fired power generation. Month-to-date storage data suggests that gas-fired power demand has been 0.5 Bcf/d higher year-on-year in September, while industrial demand has been running higher by a similar amount, Horwitz said. "We anticipate a relative uptick in gas-fired power generation over the next several weeks as the low-demand shoulder period should make room in the power generation stack for the resumption of [2 Bcf/d-plus] of fuel switching away from coal. Given current Central Appalachian coal prices, power producers with dual-fired capacity should favor gas as long as prices remain below $4.75."
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