Cash prices overall were down about a nickel on average Friday as traders faced little incentive to secure three days of gas when spot prices could be made during the weekend and seasonal weather forecasts posed little reason to lock-in supplies.
Price weakness was widespread, and the Northeast, East and California were notably soft. At the close of futures trading October was 8.8 cents higher at $2.885 and the November contract had gained 10.9 cents to $3.071. November crude oil gained 47 cents to $92.89/bbl.
Rocky Mountain prices suffered double-digit losses, and a major pipeline was close to calling for an operational flow order (OFO). "Kern River hasn't posted it yet, but they are at the low end of their operating range and are close to posting an OFO," said a Rocky Mountain producer. "I'll bet it's because they have some hot weather out there [in California] and those nuclear plants [San Onofre] are down."
Rocky Mountain producers have little, if any, incentive, however, to send their gas west to Malin. Quotes for Kern River receipts for weekend and Monday delivery came in at $2.71, down 8 cents, but gas delivered to Malin was quoted 11 cents lower at $2.72. Transportation between the two hubs typically is from 8 to 10 cents. Gas on CIG was 11 cents lower at $2.60, and at the Cheyenne Hub parcels were down 9 cents to $2.63 for weekend and Monday delivery. At Opal quotes were 9 cents lower at $2.71.
Temperature forecasts remain above normal for Southern California. AccuWeather.com forecast that Friday's high of 90 in Los Angeles would ease to 86 on Saturday and Sunday. Monday was expected to drop to 82. The normal high for Los Angeles this time of year is 83.
Weekend and Monday prices nonetheless fell at California points. PG&E Citygate was off 2 cents to average $3.29, and SoCal Citygate came in 6 cents lower at $3.07. At the SoCal Border deliveries were 5 cents lower at $2.98, and on El Paso S Mainline weekend and Monday gas was quoted at $3.00, off 5 cents as well.
Producers in the Marcellus Shale got some good news. Tennessee got approval to start up facilities that should help relieve congestion and give producers a more market-representative price.
In the Tennessee Marcellus price zone quotes for Friday through Monday deliveries came in at an average $2.38, down about a nickel from Thursday but almost 40 cents lower than market points farther west such as Tennessee Station 313. Station 313 deliveries were $2.77 down 6 cents.
Tennessee Gas Pipeline Co. got the go-ahead from the Federal Energy Regulatory Commission (FERC) Thursday to start up facilities that will enable it to provide interim firm transportation service to three shippers on its Northeast Supply Diversification Project beginning Oct. 1, one month ahead of the in-service date for the entire project.
FERC approved the Kinder Morgan pipeline's request to place into service a seven-mile, 30-inch pipeline looping segment and other facilities at Compressor Station 317 in Tioga and Bradford counties, PA, to provide interim firm service to Anadarko Energy Services Co., MMGS Inc. and Seneca Resources Corp. (see related story).
Other eastern points were softer as well. Deliveries on Dominion fell 4 cents to $2.74 and on Tetco M-3 weekend and Monday gas shed a dime to $2.79. Quotes on Transco Zone 6 New York were 6 cents lower at $2.83.
Futures traders were not all that inspired by the nearly 9 cent gain. "It was supportive, but the market is still in a range," said a New York floor trader. "Probably the $3.00 area is a sale, but a close over $3.12 is probably a lock for a push up to the upper $3.20s to the $3.30s before it pulls back."
"I don't see a reason for the market to do that [close over $3.12], and I think the market may just be drifting away from the $2.73 area. Going higher the air will get a little thin and the market is likely to fail," the trader said.
Near-term weather is not likely to be much of a price-driver, but the key weather factor in eastern and Midwest markets appears to be variability. "Changeable weather into the weekend will have folks in the Northeast in shorts and short sleeves one day and reaching for jackets and long sleeves the next," said Alex Sosnowski, meteorologist with AccuWeather.com.
"The temperature roller coaster will continue in the East into the weekend. A big cool push will reach the I-95 corridor by Sunday. Ahead of the cool push, temperatures may lunge to near 80 degrees in New York City and into the 80s in Philadelphia, Baltimore and Washington, DC, on Saturday, a little uncharacteristic for the first day of fall. Autumn 2012 officially arrives at 10:49 a.m. EDT, Saturday, Sept. 22.
"The air that follows has the potential to bring the lowest daytime highs under sunshine to the I-95 zone so far this season. Temperatures may fail to reach 70 degrees despite bright sunshine for a day or two spanning Sunday through Tuesday."
To the west conditions are expected to be more unsettled. "Farther west near the Great Lakes, the chilly air passing over the relatively warm waters will lead to atmospheric chaos in the form of frequent showers, thunderstorms and even waterspouts. Some angry clouds and showers will reach into the Appalachians Sunday, where temperatures may spend much of the day in the 50s," he said.
Analysts suggest that the market may not need any weather dynamic to stage at least a moderate advance. "Although strength has been limited, the ability to advance without significant help from the storage data suggests a market that could work higher by about 15-16 cents from [Thursday's] settlement with any assistance at all from the weather factor," said Jim Ritterbusch of Ritterbusch and Associates.
"However, such help remains elusive as most temperature views extending out through the first week of October are suggesting mild patterns across most of the nation that will sharply restrict [power generation] demand while enabling injections to recover toward normal builds as was seen in [Thursday's] EIA release. Average weekly supply hikes of around 60-65 Bcf would appear likely going forward, assuming no major supply disruptions due to storm activity into the GOM. This would imply a supply peak in the 3.90-3.95 Tcf region. Such supply cover will prove ample from about any measure and will act as a limiter on additional price gains with sustainable advances unlikely to above the $3 mark," he said in a morning note to clients.
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