Perhaps due to a little heating load starting to appear in some northern and western market areas, along with moderate warming trends returning in the South, the market found enough weather-based support to see modest gains at a small majority of points Tuesday.
However, quite a few locations were still recording moderately softer numbers due to a prior-day futures dip of 7 cents, the continued lack of a tropical storm threat to offshore production and the fact that neither heating nor cooling load was substantive in several regions.
The Midcontinent, Rockies and California corralled the lion's share of prices that were flat to about 15 cents higher. Losses ranging from 2-3 cents to about C15 cents were clearly largest in Western Canada, where merely cool to chilly temperatures are replacing some of the near-freezing conditions of a few days ago.
It's not much, but the cash market will accept any help it can get after November futures broke a losing streak with a small gain of 1.6 cents Tuesday (see related story), providing a modicum of support for physical traders Wednesday.
The National Hurricane Center (NHC) said a low-pressure area about 140 miles north of San Juan, Puerto Rico Tuesday afternoon had a high chance (80%) of becoming at least a tropical depression within the following 48 hours as it moved northwestward at 5-10 mph. That was up from 60% in the morning. However, due to strong upper-level winds, NHC gave near-zero odds of development to a trailing large area of disorganized showers and thunderstorms about 950 miles east of the Lesser Antilles.
Although NHC didn't say so specifically, two analysts -- Addison A. Armstrong of Tradition Energy and Tim Evans of Citi Futures Perspective -- indicated that the first system (known as 97L) is expected to curl back toward the northeast and pose no threat either to Gulf of Mexico production or the East Coast.
Although Henry Hub prices fell about a nickel, IntercontinentalExchange (ICE) said volumes traded there on its online platform soared from 937,000 MMBtu Monday to 1,050,100 MMBtu Tuesday. On the other hand, ICE reported, Katy Hub transactions plummeted from 750,800 MMBtu to 604,000 MMBtu on those two days while the price level dropped a little more than a nickel.
Rockies producers and to some extent Canadian suppliers are dealing temporarily with reductions of storage injection options as the Jackson Prairie storage facility is shut in through Thursday for bottom hole pressure testing (see Daily GPI, Oct. 4). Also, Questar's Clay Basin facility is unavailable for injections or withdrawals through Oct. 14 due to reservoir tests (see Daily GPI, Oct. 5).
Tennessee was most explicit about guarding against excess linepack with an OFO Action Alert starting Thursday (see Transportation Notes), but it was among several eastern pipes warning shippers against creating positive imbalances during an anticipated period of low demand.
Southern temperatures are in an uptrend, but don't expect any dramatic increases in air conditioning demand. Few locations outside Texas will get above the low 80s later this week, while most cities will be limited to the 80 area and a few such as Atlanta will still top out in only the low to mid 70s Wednesday. Overnight lows in the 40s and lower 50s may be inspiring at least some residents of the Northeast, Midwest and Rockies/Pacific Northwest to turn on their furnaces occasionally.
Nominated volumes for Tuesday fell at 16 of the 23 trading points covered by Bentek Energy's U.S. Natural Gas Hub Flows chart (granted, drops of 1-2% at four points were rather minuscule). NGPL-TexOk saw by far the biggest increase of 121,000 MMBtu to 590,000 MMBtu (26%), Bentek said. The top percentage decline of 25% was at Waha, down 151,000 MMBtu to 455,000 MMBtu, although on an actual volumetric basis larger downturns of 283,000 MMBtu, 208,000 MMBtu and 193,000 MMBtu were recorded at Texas Eastern M-3, the PG&E citygate and the Chicago citygate, respectively.
A utility buyer in the South said his main project this week is "getting our winter RFPs [requests for proposals] ready" for the November-March period. All will be priced using either indexes or basis, he said; the company doesn't make fixed-price deals "because we do our financial hedging separate from physical transactions."
The buyer said frost was occurring in the central part of his state as early as Monday night, but wasn't expected to last. Since "all you hear about is oversupply" and the lack of weather demand, he found it kind of hard to discern any potential for a substantive rebound in spot prices on the horizon.
An Upper Midwest marketer also reported area frost in the last two mornings, but since temperatures were rising to the mid 60s during the daytime, local heating load was still minimal for most folks. A little bit of warm-up was forecast for this weekend, she said, but it won't be much. Her company is glad to have prices becoming mostly softer lately, she added.
Credit Suisse analyst Teri Viswanath expects a 79 Bcf storage build to be reported for the week ending Oct. 1. Milder temperatures across the country have reduced overall gas demand, resulting in the higher week-on-week injections, she explained. In the "very near term," Viswanath said, she expects futures prices to range around the new lows established earlier in the week. "We suspect most of the bearish news has already been priced into the market, and therefore we have a hard time anticipating new events that will trigger a further slide in prices."
Meanwhile, Strategic Energy & Economic Research's Ron Denhardt is looking for a smaller injection of 74 Bcf, and Stephen Smith of Stephen Smith Energy Associates is in close agreement in predicting a 75 Bcf addition, which Smith said is down substantially from his original estimate of 84 Bcf.
In a considerably more long-term projection, Citi Futures Perspective's Evans said he anticipates builds of 85 Bcf, 81 Bcf, 90 Bcf and 60 Bcf for the weeks ending Oct. 1, Oct. 8, Oct. 15 and Oct. 22, respectively.
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