From all of the large double-digit gains throughout the cash market Tuesday, it would seem like: (a) a major hurricane had sprung up unexpectedly in the middle of the Gulf of Mexico production area, or (b) huge blizzards had begun raging throughout North America.
Neither climate condition was in effect, so cash traders were left to scratch their heads about how cash prices could rise from a little less than 20 cents to nearly 85 cents, with large upticks of a quarter to about half a dollar spread liberally across the price landscape.
The cash market had some support from Monday's 15.1-cent gain by December futures, and will get a further boost from a screen uptick of 12.2 cents Tuesday (see related story).
It was difficult to discern the source of such massive cash bullishness. Yes, much chillier temperatures are due in most of North America going into the weekend, but for now seasonal mid-October conditions will remain in effect for the next day or two. Granted, some sub-freezing lows are due Wednesday in parts of the Rockies, upper New England and Western Canada, but their heating load would be rather minimal.
A savvy Gulf Coast producer was typical in saying "I don't know" about Tuesday's big cash gains. "I'm scratching my head, and all of my customers have been asking me why the big gains," but he didn't know what to tell them. Electric prices are not that high, so that's not an explanation, he said. "Pretty much everybody is baffled."
He noted that no analysts or traders had been predicting Tuesday's big rush. Nymex was following cash upward for a while, then dropped before going back up, he said.
After a brief period of no tropical Atlantic activity, the National Hurricane Center said Monday morning it was monitoring a nearly stationary low-pressure system about 100 miles north of Aruba and Curacao. It gave the system a low (10%) chance of becoming a tropical cyclone during the following 48 hours.
It will be getting colder in most of the U.S. going into the weekend, but the forecast calls for mild to cool temperatures to reign in most areas into at least Wednesday. Most of the seriously cold readings will occur in Western Canada, the Rockies and upper New England.
A Midcontinent producer said some people were still managing to find storage parking space; otherwise he also had no idea about what was driving cash prices so much higher Tuesday. "I have no clue," he said, adding that Midcontinent prices were starting to approach $4 again.
The producer said he sold NGPL-Midcontinent at $3.58 early on ICE, but he said he could have gotten much as a nickel more later because of late rising prices.
Ron Denhardt, vice president of natural gas services at Strategic Energy & Economic Research, predicted a storage injection of 23 Bcf for the week ending Nov. 5. Stephen Smith of Stephen Smith Energy Advisors said his final outlook of an 18 Bcf build was down from an earlier estimate of 23 Bcf. Kyle Cooper of IAF Advisors anticipates an addition of 27 Bcf.
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