Shaking off last Friday's softness, natural gas cash points across the country overlooked early spring temperatures to record gains across the board, but behind the scenes most of the talk was centered on what, if any, repercussions might the U.S. gas market see down the road from the unfolding tragedy in Japan.
Cash market increases were fairly uniform across the board with most averages picking up between a dime to 20 cents. A few spots in the Northeast added a quarter or more.
Transco Zone 6-NY, Iroquois Zone 2 and Algonquin Citygate led the Northeast gains with increases of 24 cents, 27 cents and 33 cents, respectively. Most West Coast, Midcontinent, Rockies and Gulf region indexes increased mostly between 10 to 16 cents.
The writing might have been on the wall Friday for Monday's cash uptick as April natural gas futures added 5.9 cents to close at $3.889 Friday afternoon. The market might receive another -- albeit smaller -- push Tuesday as front-month natural gas futures added another 2.5 cents Monday to close the regular session at $3.914.
"Prices were pretty firm on Monday, but that is what you would expect following Friday's action on the screen," said a western utility trader. "Cash points really had no other choice than to follow futures given the fact that there is not much else happening on the demand side."
Monday's gains were a sight for producers' sore eyes after they saw nearly across-the-board declines for the five-trading days ending March 11. Some Northeast spots declined last week by around $2.50 as temperatures moderated.
Natural gas prices could also find some support from the tragedy currently unfolding in Japan following last week's massive earthquake and resulting tsunami. Much is still uncertain, but some experts believe the impact on U.S. gas markets will be indirect, but significant.
Analysts at Tudor, Pickering, Holt & Co. Securities Inc. said Monday morning that the natural disaster will likely impact the global crude oil, natural gas and coal markets because Japanese imports will increase to make up for downed infrastructure and rebuilding.
With three nuclear plants currently offline in Japan, Russia and Qatar have already stepped up to say they are willing and able to step in with supplies of liquefied natural gas (LNG) to take up the slack for lost power generating capacity (see related story).
In addition, with Japan currently trying to stave off a potential nuclear meltdown at more than one of its damaged nuclear facilities, TPH sees the publicity hit to nuclear power translating into more reliance on gas-fired generation worldwide. In response to the unfolding events, Germany has already temporarily suspended nuclear plant extensions and Switzerland has suspended new nuclear plant approvals.
"Longer term likely impacts new nuke construction; already big headwinds in places like U.S. just got bigger," the TPH analysts said. "25% of nuclear power plants currently offline and not far fetched to assume they're off for long while. This likely creates 0.5 Bcf/d of increased gas demand and 100,000-plus b/d of increased oil demand."
The analysts noted that Japan currently uses 10 Bcf/d of gas, but the country's appetite has been growing by 2.5% annually since 1990. Gas imports are 75% from Asia and the remaining 25% from the Middle East.
Commenting on the potential impact, the western utility trader told NGI that the U.S. might see a little less LNG but the supplies would not be missed. "We saw this once before. In 2004 Japan had some of their nukes off, but when they came back on, U.S. prices didn't fall apart," she said. "I really don't think we're going to see much of an impact this time around either."
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