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Bull Run Ends With Losses at All Locations

Likely in anticipation of a holiday weekend that is often the lowest-demand period of the year for many utilities and end-users, prices fell across the board Thursday. The previous day's fall of 3.9 cents by August futures was an additional, albeit minor, bearish factor for the cash market.

Losses ranged from a little less than a nickel to about 20 cents. They were distributed fairly evenly across the overall market, with a modest majority of them in double digits.

Although it surpassed year-ago and five-year average numbers, the Energy Information Administration's report of a 78 Bcf storage injection for the week ending June 24 fell a bit short of consensus expectations in the low 80s Bcf. Nymex traders obviously regarded the report as bullish, since prompt-month futures went from modestly negative earlier in the morning to an eventual increase of 5.9 cents on the day (see related story).

Citi Futures Perspective analyst Tim Evans said there may have been "some timing issues involved in the lower number, which follows the surprising 98 Bcf build in the prior week."

As expected, Tropical Storm Arlene made landfall early Thursday just south of Tampico, Mexico without disturbing Gulf of Mexico production. A couple of tropical waves were being monitored in the Atlantic, but they were too remote to be meaningful to the gas market at this point.

Hot weather will continue to dominate from the South into the desert Southwest, with inland California due to reach the 90s Friday. The West Coast is warming as well but still can expect comfortably mild temperatures. The Rockies were due to stay warmish, but a bit cooler than before.

Mixed trends are in store for the Midwest; e.g., according to Weather Central, Chicago highs will jump from the mid 80s Thursday to the mid to upper 90s, while Minneapolis falls from the mid 90s to the upper 80s. It's a mixed bag also in the Northeast, where highs will rise in the Philadelphia area, be essentially unchanged in New York City and retreat a little in New England.

Columbia Gas in Appalachia joined a chorus of many pipes in urging customers to avoid running positive imbalances during the holiday weekend, saying it would restrict nominations to resolve due-pipe imbalances.

SoCalGas appeared to be finally ending a high-linepack OFO, but Southern California border prices still dropped a little more than a dime. Meanwhile, after setting the probability of a Strained Operating Condition (SOC) at high Wednesday due to excess linepack, El Paso said things had eased enough Thursday to lower the SOC potential to moderate.

A Rockies producer said he considered Thursday's lower cash prices as mainly a reflection of the previous day's futures softness since near-term cooling load remained abundant in several areas. In fact, he said, despite the holiday weekend factor he thinks the heat forecasts will keep cash flat to a little higher Friday, especially after Thursday's futures rebound.

He tended to discount the temperature jumps in the Chicago area as a significant price booster, saying Colorado in June 2010 had used more gas to produce electricity than Illinois, mainly because the Land of Lincoln is much more dependent on coal and nuclear generation.

Interest in the Niobrara Shale continues to grow, the producer said. The Niobrara is early in its development, he said, and a number of big producers are still in 3-D seismic stages there.

An industrial end-user said he bought July baseload at index-flat or slightly higher or lower for his company's plants scattered around the country. He said he got plenty of offers, which was not surprising since supply growth seems to be greatly outpacing demand.

Also not surprisingly, IntercontinentalExchange (ICE) had little to report in last-day bidweek activity. In a small volume of trading at the PG&E citygate, ICE said Thursday's numbers averaging $4.68 were up nearly a nickel to $4.68. However, the Columbia Gas-onshore pool saw a drop from $4.30 to a little less than $4.23.

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