Overall cash prices advanced on average by six cents Monday with the greatest gains reserved for a handful of Northeast points as forecasted hot weather combined with delivery restrictions. Texas and California points recorded nominal gains. At the close of futures trading August had fallen 7.3 cents to $2.801 and September had shed 7.6 cents to $2.793. August crude oil added $1.33 to $88.43/bbl.
Traders said gas at Northeast points [Algonquin] was "all over the place. It's at $6.50, went down to $6 and then up to $6.80," said a Northeast trader.
"If you have the transportation you can make some good money; that's more than $3 over Nymex." He added that the pricing at the points was not likely to last. "The heat is really for tomorrow [Tuesday], and then things start cooling off. It's one of those things. The gas has to be there on the day you need it.
"Tomorrow is the hottest day and the next two days are pretty good loads and then things fall off pretty dramatically. That's been the tale of the tape this summer. Really hot days and basis explodes and then some more normal days, but on the normal days everyone is pretty long so not much happens," the trader said.
Next-day power prices exploded at eastern points. IntercontinentalExchange reported that next-day Nepool (New England Power Pool) LMP (locational marginal prices) surged $51.98 to $130.00/MWh. Day-ahead power at the PJM West Hub vaulted $32.60 to $98.57.
Quotes on Tennessee Zone 6 200 L surged by more than a buck and a half to well over $6, and the Algonquin Citygate was higher by more than $1.60. Iroquois Waddington gained nearly 40 cents.
Algonquin Gas Transmission reported a critical notice for gas deliveries July 17 on its website. It said it was restricting interruptible transportation and some secondary out-of-path nominations sourced upstream from both its Southeast Compressor Station and also its Cromwell Compressor Station.
Other eastern points were also in the gains column. Transco Zone 6 New York was close to a quarter higher, and Tetco M-3 and Dominion both posted gains well over a nickel.
AccuWeather.com forecast the high in New York City would reach 97 Tuesday and ease to 96 on Wednesday. The normal high in New York this time of year is 84.
Texas locations posted gains but nowhere near the rate of East and Northeast points. El Paso Permian was quoted almost a nickel higher, and Katy and the Houston Ship Channel both added a couple of pennies. NGPL S TX came in close to a nickel higher, but deliveries to Carthage could only muster a rise of a couple of pennies.
Malin was quoted a penny lower and PG&E Citygate eased about a nickel, but other California points rose. SoCal Citygate was close to 2 cents higher, and SoCal Border add almost 3 cents. El Paso S Mainline was seen approximately a nickel higher.
Futures traders were surprised by the day's trading. "It looked to me that we were going to trade above $2.92, and then before you could blink it was trading $2.855. We came off a little more after that. I don't really have a good feel for the market right now," said a New York floor trader.
It may be a stretch to see any immediate bullish developments in longer-term weather forecasts. They are expected to be slightly above normal in the 11- to 15-day period. WSI Corp. of Andover, MA, predicts above-normal temperatures within a ridge bordered by North Dakota and Illinois and Wisconsin and Nebraska. "The warmest temperatures on average compared to normal during the 11-15 day period are expected from the Upper Great Lakes to the North-Central Plains. "Today's [Monday's] forecast is somewhat cooler than yesterday's outlook from the Midwest to the Great Basin.
"Temperatures may run warmer than forecast across the south-central U.S. in the presence of a subtropical ridge."
The National Hurricane Center in its 2:00 p.m. EDT Monday report said no tropical cyclone activity was expected in the following 48 hours in the Atlantic, Caribbean, or Gulf of Mexico.
Risk managers suggest that the current market environment is not conducive to implementing new strategies, but they are poised to strike should prices change. "Overall, the fundamental news has not changed. Supplies are more than adequate and demand is mediocre," said Mike DeVooght in a weekly letter to clients. "We are looking for a significant rally for an opportunity to hedge additional months or a significant break to sell puts and go long for end-users. On a trading basis, we will continue to hold current short positions."
DeVooght counsels trading accounts and end-users to stand aside, but producers and those with exposure to lower prices, he suggests, should hold on to an October $2.50 put position structured to cover the summer strip implemented earlier at a cost of 25-27 cents.
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