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Heat Extends Rally at Nearly All Locations

The combination of continued warm to hot forecasts in many areas and the return of industrial load from the greater declines of a low-demand holiday weekend generated strong price increases nearly across the board Tuesday. Generally hot weather is expected to continue at least into mid-July in much of the eastern two-thirds of the U.S.

Flat quotes at Texas Eastern-East Texas were the sole exception to gains ranging from a little less than a nickel to a little more than 40 cents.

Even with negative guidance from the August futures drop of 6.3 cents on Friday, the cash market was able to achieve gains nevertheless. It regained some screen support for Wednesday's trading after the prompt-month contract rebounded by 5.2 cents (see related story).

Despite the ending of the holiday weekend and lifting of a high-linepack OFO by SoCalGas, Kern River reported that its nominated deliveries into the SoCalGas system shrank from 321,291 Dth Monday to 276,508 MMBtu Tuesday at Wheeler Ridge and from 406,543 MMBtu to 385,560 MMBtu at Kramer Junction. But prices were up about 15 cents at both the Southern California border and the SoCal citygate.

Westcoast said it was experiencing high linepack Tuesday.

The Northeast was able to realize many of Tuesday's largest gains despite The Weather Channel predicting a cold front dipping south of the Canadian border into the region Wednesday and bringing scattered thunderstorms from Maine to upstate New York. However, New York City was forecast to see its high rise from the upper 80s to the mid 90s Wednesday, while Philadelphia could expect to stay very warm in peaking around 90.

However, the Midwest was due to remain only medium warm with highs mostly around the mid 80s, or slipping quite a bit from the mid to upper 80s in the Chicago area Tuesday to only about 80 Wednesday, according to Weather Central. And although the South had no shortage of air conditioning demand in reaching the low to mid 90s, that represents a modest cooldown from mercury readings approaching 100 last week.

The weather story remains much the same in the West: mild to cool along the California coast but warm to severely hot in inland California, the Rockies and desert Southwest. One new development, however, is that some locations in the Pacific Northwest and Western Canada are starting to reach either side of 80 after being much cooler at times prior to the weekend.

Noting some area highs in the low 100s, a Midcontinent producer said the main problem his company is having currently is curtailments from Oklahoma intrastate pipe Enogex extending a maintenance outage of Line 19 through Friday (see Daily GPI, July 5). Line 19 is one of the downstream delivery points from a processing plant that the producer uses, and its outage is causing the company to divert gas to OGT (another Oklahoma intrastate), "and they're now full at this delivery point, thus limiting the volume they can take," he said. The producer sells gas to the Oklahoma utilities, he added, "so this is causing some issues with the hot weather right now." Customers served by both Enogex and OGT are burning quite a bit of gas right now in generating power, he said.

The market was considerably more sedate for a utility buyer in the South, who said he was not encountering any pipeline hassles. However, area generation demand for gas was staying strong with peak temperatures reaching the mid 90s Tuesday, and conditions should stay pretty much like that into the next week or so, he said.

The buyer said his utility is staying on target with its storage refill program but is buying only about half as much gas for injections during July as it did in May and June.

The active number of gas-directed drilling rigs in the U.S. increased by one onshore unit during the week ending July 1, according to the Baker Hughes Rotary Rig Count. The Gulf of Mexico tally was unchanged. Baker Hughes said its latest count is 1% lower than a month ago and down 9% from the year-earlier level.

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