It likely surprised more than one trader to see the extent of recovery Monday from the major losses at all points on the preceding Friday, especially since near-term weather influences continued to be mostly benign. However, some may have eyed forecasts getting colder in several areas toward the end of the week. The return of industrial load from weekend recess also was a modest bullish factor.
A large majority of locations were flat to about a quarter higher. The Midcontinent and Rockies recorded most of the biggest rebounds, which was somewhat fitting since they had tended to be the weakest market areas going into the weekend. Several scattered points dropped from 2-3 cents to about 15 cents, but only one of the losses was more than about a nickel.
After looking for much of the day like they would continue on a steeper downhill path, November futures began their three-day countdown to expiry by clawing their way back up from negative territory to wind up Monday with a small gain to a small loss of 1.5 cents (see related story).
Former Tropical Storm Richard had weakened to a tropical depression Monday before passing the halfway point of its overland trek across Belize, northern Guatemala and the lower end of Mexico's Yucatan Peninsula. The center of Richard was expected to enter the Bay of Campeche at the extreme southern end of the Gulf of Mexico (GOM) late Monday night or early Tuesday morning without regaining tropical storm status, according to the National Hurricane Center (NHC).
In fact, NHC said the system was likely to weaken further and rated chances of barely tropical storm-force winds spreading much into the bay as very low. Although Richard's projected course was pointed just south of the Mexico-U.S. border, it was believed unlikely that U.S. Gulf of Mexico producers would have any concern about Richard since offshore infrastructure tends to peter out significantly near the South Texas coast.
A large areas of showers and thunderstorms centered with upper-level and weak surface low-pressure areas in the eastern Atlantic had grown in area over the weekend but still rated only 10% odds from NHC of becoming a tropical or subtropical cyclone during the following 48 hours.
There were still enough lingering warm temperatures across the southern tier of states to keep some air conditioners humming, but mild nights severely limit the use of gas-fired peaking generation. And although some freezing lows have invaded parts of the Rockies and Western Canada, most residents of northern and western market areas continue to enjoy the "in-between" period of summer phasing into winter.
What's wrong with this picture, one source asked rhetorically: moderate weather, near-record storage, soft futures and still no serious tropical threat -- yet cash prices revive anyway? The only potential rationalizations that occurred to him were colder forecasts toward the end of the week, and buyer bargain-hunting after Friday's plunges, especially with many Midcontinent and Rockies points still averaging less than $3 even after Monday's recovery.
With Tennessee having already lifted an OFO Action Alert in its two farthest downstream zones, there was very little of significance remaining in transportation constraints Monday. However, SoCalGas did slightly restrict storage injections (see Transportation Notes).
IntercontinentalExchange (ICE) said baseload Chicago citygates traded for November on its platform averaged $3.42 Monday, the first official day of bidweek business. That would represent a whopping half-dollar drop from the October first-of-month index.
The Southern California border is seeing an even greater plunge of a little more than 70 cents in initial $3.08 numbers reported there by ICE.
The number of drilling rigs searching for gas in the U.S. fell almost imperceptibly by one to 965 during the week ending Oct. 22, according to the Baker Hughes Rotary Rig Count. An addition of three rigs in the Gulf of Mexico was offset by four being deactivated onshore. Baker Hughes said its latest dally was flat from a month ago and 33% more than the year-earlier level.
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