Physical gas prices on average Thursday were flat with weakness noted on Northeast pipes and firming prices in Southern California. The Energy Information Administration (EIA) reported a storage build of 67 Bcf, about in line with expectations, and futures worked higher. At the close of futures trading October had risen 3.5 cents to $2.797 and November was up by 1.7 cents to $2.962. October crude oil fell 11 cents to $91.87/bbl.
In the Midcontinent traders lamented the lack of storage. "We are getting clobbered. There is no storage space," said an Oklahoma marketer. "OGT [Oklahoma Gas Transmission] told me you have to move gas. You can't stick it in the ground."
He added that there was always this disconnect between supply and the market. "People such as hedge funds are thinking it's a good value, but they don't look at the supply picture as we do. That's great. Let them have it. We see the disconnect and we like it. It's a great opportunity to sell.
"You need to be market short to take advantage of the supply that is coming, but a lot of people don't want to be short. They want to do back-to-back deals or have no risk. They don't short the market because the market can surprise you, but at the same time we believe fundamentally that as you get into the winter, that's when the supply situation gets even worse. You have existing supply that is coming on line along with the storage withdrawal."
Near-term weather in the Midcontinent just might spark some additional demand. According to Weatherunderground.com, the high Thursday in Oklahoma City of 91 degrees is expected to subside to all of 90 over the weekend before dropping to 79 on Monday.
The National Weather Service in Norman, OK, said, "Dry and mild conditions are expected through the end of the week. A series of fronts will move across the area through the weekend...bringing cooler and drier air into Oklahoma and North Texas. With somewhat meager moisture content...expect little in the way of showers or thunderstorms...although isolated activity will remain possible...The strongest of the fronts will move through by Saturday evening."
Gas for Friday delivery on OGT dropped 3 cents to average $2.64, and deliveries on ANR SW added 4 cents to $2.69. NGPL Mid Continent Pool added 2 cents to $2.75. Quotes on Panhandle Eastern were up a cent to $2.69.
The Northeast continued its volatile ways as Algonquin Gas Transmission (AGT) continued to post notices of curtailments. "Due to the previously posted pipeline maintenance downstream of its Cromwell Compressor station, AGT has restricted interruptible, secondary out-of-path nominations that exceed entitlements, secondary out-of-path nominations within entitlements and secondary in-path nominations sourced upstream of its Cromwell Compressor Station (Cromwell) for delivery downstream [northeast] of Cromwell," it said.
The pipeline also said that some capacity "may become available as the nomination and confirmation process continues throughout the day."
Quotes at Algonquin Citygate shed 4 cents to average $3.68, and gas into Iroquois Waddington slipped 10 cents to $3.16. Deliveries on Tennessee Zone 6 200 L fell 12 cents to $3.37.
Prices at West Coast points were generally steady to firm. Next-day gas at Malin rose a penny to average $2.83, and gas at PG&E Citygate lost a penny to $3.31. At SoCal Citygate Friday deliveries added 2 cents to $3.13, and SoCal Border quotes were 5 cents higher at $3.03. On El Paso Mainline S parcels were 4 cents higher at $3.05.
Futures trading was less than spectacular as well. "After the [storage] number came out, we traded the rest of the day between $2.78 to $2.82," said a New York floor trader. The trader noted that once the market made a high at $2.821 for all intents and purposes, the slightly above-expectations build of 67 Bcf was ignored by the market. "It stayed in a range the whole afternoon."
With cooling load now gone, the Gulf of Mexico restored to normal production and production continuing at near-record levels, market bears were relishing the morning release of storage data by EIA. With seven weeks left in the traditional injection season, there is still plenty of time to pack away enough gas to cause supply disruptions and send prices reeling, they say.
Before the release of the number it looked as if there will would be difficulty reaching last year's 89 Bcf injection. IAF Advisors of Houston calculated a build of 61 Bcf, and United ICAP forecast an increase of 66 Bcf. Bentek Energy predicted an injection of 65 Bcf. The five-year average injection is 73 Bcf.
Pundits didn't see storage reaching full capacity. In fact, the EIA itself forecasts final storage at 3,950 Bcf, a whisker behind last year's record 3,954 Bcf.
"According to the EIA's revised storage capacity tally, we are now 81% full; the new total is 4.239 Tcf (139 Bcf more than last year)," said John Sodergreen, editor of Energy Metro Desk, before the number was released. "Despite what we might have thought last month about 2012 end of fill-season tallies -- before EIA released its revised capacity figures, that is -- there is now, no way on God's green earth we will even come close to hitting capacity this year. Last year [at] this time, injections averaged roughly 100 Bcf (or more) for six weeks. Not this year. This new reality will lead to paring down the year-over-year surplus quite nicely and likely support prices in the $3.00-plus neighborhood sooner rather than later."
Present storage stands at 3,496 Bcf, and to reach 4,239 Bcf in six weeks would require average weekly builds of 124 Bcf.
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