The physical market overall gained on average less than a penny Wednesday with most points vacillating within a penny of unchanged. California locations did exhibit gains, however. Futures managed to advance as traders warily kept their eyes on a looming tropical storm now in the eastern Caribbean, and the ultimate trajectory won't be known until the storm makes a critical turn to the north. At the close of futures trading September had risen 5.1 cents to $2.826 and October had added 5.4 cents to $2.863. October crude oil continued its march higher posting a gain of 42 cents to $97.26/bbl.
In the Great Lakes temperatures have eased somewhat and that has been enough to reduce the use of natural gas for electrical generation. "It's been pretty toasty and the high is expected to get to 90 today," said a Midwest utility buyer. "Our power customer is not using the volumes they told us they would, yet we have to nominate the volumes but when they don't use it we have to store it. If we are overstored then Northern Natural charges us a penalty."
The outage of the nearby Fort Calhoun nuclear power plant has had little impact on gas usage, the buyer said. The facility has been offline for a scheduled refueling outage since April 9, 2011. During that time, the employees of Omaha Public Power District were successful in protecting the plant during the historic Missouri River flooding. Returning the plant to operation has been a different story and personnel at the plant have been working to get the plant operational along with complying with the Nuclear Regulatory Commission on current regulatory issues.
The 476 MW Fort Calhoun plant is just one of the 17 nuclear plants shown as either off-line or producing at less than 100% of full power in the NGI NRC Power Reactor Status Report. The 17 nuclear plants' generation represents a loss of 7,786 MW out of total U.S. capacity of 100,900 MW generated from 104 facilities.
Higher power usage may translate into natural gas demand after all in the Midwest, for after a respite of two weeks the Midwest is expected to see a return of 90 degree temperature readings. Tom Skilling of the ChicagoWeatherCenter said "Chicago's first 90-degree daytime high in 16 days [will occur] Thursday and the first set of consecutive 90s in nearly three weeks [is expected] Thursday, Friday and Saturday." Skilling was forecasting that Wednesday's high in Chicago of 85 would rise to 91 on Thursday and 94 on Friday.
Gas for Thursday delivery in the Midwest registered a mixed response. At the Chicago Citygate quotes were off about a penny and on Alliance next-day gas fell close to 2 cents. On Consumers spot prices added almost 3 cents and Michcon gas was up 1 cent. Parcels on Northern Natural Gas Ventura slipped a couple of pennies.
Gulf points were mostly steady. Henry Hub gas was flat, while Columbia Gulf Mainline rose a penny. Tetco E LA was higher by a couple of pennies and Tennessee 500 L was flat. Quotes at Transco Zone 4 were also unchanged.
Quotes on pipes feeding gas-hungry Southern California were mostly higher. Next-day deliveries to PG&E Citygate added 4 cents as did SoCal Border. SoCal Citygate and El Paso S Mainline each fell 3 cents.
Futures traders showed only modest enthusiasm for Tropical Storm Isaac and what market impact it might have. "I think it gave buyers a little something to hang their hat on, but it wasn't much more than that," said a New York floor trader. "We are keeping an eye on it, and the market is poised, but I think today was some short covering and buying just in case."
Forecasters are keeping an eye on it as well. "Current projections bring Isaac, now a strengthening tropical storm, to Florida's neighborhood during the first part of next week," said AccuWeather.com meteorologist Alex Sosnowski.
"Exactly when Isaac begins a more aggressive northward curve, near the disruptive mountains of the Greater Antilles (Puerto Rico, Hispaniola and Cuba), will determine if the storm tracks directly over Florida, Atlantic waters east of Florida or the Gulf of Mexico. At this time, all are on the table, until we see a definitive northwest turn."
Not only will traders have a potential threat in the form of Isaac to deal with, but Thursday's inventory report is likely to show a continued lessening of the storage surplus although at a slower rate. Last year 66 Bcf was injected and the five-year pace stands at 53 Bcf. A Reuters survey showed an average 38 Bcf and United ICAP forecasts an increase of 41 Bcf. Industry consultant Bentek Energy predicts a build of 37 Bcf.
Analysts see potential weakness in prices as summer AC loads diminish. "We see some potential for seasonal weakness in price as summer air conditioning demand declines and storage fills more quickly toward a possible new record peak," said Tim Evans of Citi Futures Perspective. "At the same time, there is also seasonal hurricane risk to production [about 4 Bcf/d] from the US Gulf of Mexico. While less than in past years with offshore production declining...[to] a 6% share of the U.S. total (compared to 23% in 2001), the recent pickup in overall Atlantic basin tropical activity may keep the sellers at bay."
In its 5 p.m. EDT report the National Hurricane Center (NHC) reported Tropical Storm Isaac was about 25 miles south southeast of Guadeloupe and was holding winds of 45 mph. It was heading to the west at 22 mph and NHC projections showed it passing to the south of Puerto Rico before turning and heading to the southern tip of Florida.
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