Monday's slight firmness in the face of still-mild weather in most areas likely was due in part to traders looking down the road a bit and seeing forecasts of colder temperatures. With the change to more bullish weather influences drawing closer, traders pushed all but one point higher Tuesday.
A minuscule dip at CenterPoint South in North Louisiana-Arkansas was the exception to overall gains ranging from about a nickel to the 35-cent area. Nearly all upticks were in double digits and tended to be strongest in the Midcontinent and Rockies, along with some Gulf Coast and Northeast locations. The Florida citygate led all increases after Florida Gas Transmission issued an Overage Alert Day.
On their penultimate day of trading November futures broke a string of losses with a small rebound of 3.7 cents (see related story).
Any lingering concern that former Tropical Storm Richard could possibly rejuvenate enough to threaten Gulf of Mexico production vanished Tuesday as the system dissipated in Mexico's Bay of Campeche into what the National Hurricane Center (NHC) called a "remnant low." NHC said Tuesday morning's advisory was its last one on Richard. It had slightly raised its odds on a low-pressure system about 1,150 miles west-northwest of the northernmost Cape Verde Islands becoming a tropical cyclone within the succeeding 48 hours from 10% to 30% but then pulled them back to 20% Tuesday afternoon. However, that system was expected to continue a generally northward track through the Atlantic and not approach land masses.
Recent injections into the two storage fields of Southern Natural Gas have finally caused inventories to exceed year-ago levels. Indeed, the 2009 and 2010 refill percentages flip-flopped in the most recent report. As of last Thursday Southern had 56.2 Bcf of its total working gas capacity of 60.0 Bcf, or 94%, full, compared to 54.6 Bcf (91%) on Oct. 22, 2009 and 54.9 Bcf (92%) on Oct. 23, 2008. In its previous weekly report Southern said the storage facilities were up to 54.6 Bcf (91%) on Oct. 14, compared to 56.1 Bcf (94%) on Oct. 15, 2009 and 53.2 Bcf (89%) on Oct. 16, 2008.
The chilling process was under way and due to continue in a windy and rainy Midwest, with Weather Central saying Chicago's high of 72 Monday was expected to dip to 67 Tuesday and then 60 (with an upper 30s low) Wednesday. The South could expect one more day of mild to warm conditions before beginning a similar cooling trend, although mercury readings would not rival the Midwest's for chilliness.
The Northeast also would remain relatively mild with highs mostly in the low to mid 70s until the storm currently battering the Midwest moves eastward to take Northeast temperatures down a peg or two. Overnight lows around freezing or slightly lower are growing more prevalent in the Rockies, but most of the West still has only modest heating load, if any.
Despite PG&E's systemwide high-inventory for Thursday (see Transportation Notes), there were increases of a little more than a nickel each at the PG&E citygate and Malin, according to IntercontinentalExchange (ICE). And volumes on ICE's online trading platform jumped from 764,000 MMBtu Monday to 922,800 MMBtu Tuesday at the citygate but dipped from 299,200 MMBtu to 250,700 MMBtu at Malin.
Prices were up about a dime or so each on ICE into Tennessee's 500 and 800 lines in the Gulf Coast after the pipeline lifted an OFO Action Alert for six upstream zones (see Transportation Notes).
Analyst Phil Flynn of PFGBest noted that the number of horizontal rigs -- "the type most often used to extract gas from shale and a component of the overall number" -- slid 19 to 907 in the week ending Oct. 22, its second straight weekly decline and the lowest horizontal rig count since Sept. 3.
A Texas marketer said he was not really surprised by the cash market's strong showing Tuesday following a Nymex move upward overnight. Much of the colder weather won't be arriving until the weekend, he said, and even then it's not going to cause a major surge in gas demand. "But by then we should get a better handle" on just how cold it will be in early November and how long that cold will endure, he said.
The marketer said November business, while slow Monday, was picking up quite a bit Tuesday but he thinks it will slack off again Wednesday. "So much stuff [baseload trading] is getting done ahead of time" in the last year or so that sometimes bidweek becomes a relative nonevent, he said.
He said November numbers were rising a bit, mainly in basis deals. Transco Zone 6-New York went to basis of plus 38.5 cents Tuesday afternoon after trading 2 cents lower that morning.
ICE confirmed that bidweek numbers were going higher, saying the Chicago citygate averaged nearly $3.45 on its platform Tuesday, up about 3 cents from Monday.
Strategic Energy & Economic Research's Ron Denhardt reported a final estimate of a 74 Bcf addition to storage during the week ending Oct. 22. Stephen Smith of Stephen Smith Energy Associates and IAF Advisors analyst Kyle Cooper had slightly lower projections of 72 Bcf and 73 Bcf, respectively.
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