Physical gas for Thursday delivery moved little in Wednesday's trading with modest losses in California offset by gains in the Northeast and Mid-Atlantic.
Most points traded within a penny or two of unchanged, while overall, the market added a penny. Weather patterns were characterized more by storm systems than any incursion of either warm or cold air capable of affecting natural gas demand. At the close of futures trading, November had retreated 9.8 cents to $4.023 and December was down 10.1 cents to $4.089. November crude oil shed 43 cents to $90.73/bbl.
Active weather systems across the country were expected to prompt rain and thunderstorms, with little expectations for extreme temperatures either warm or cold, except possibly on the West Coast. Wunderground.com meteorologist Kari Strenfel forecast that "a low pressure system will move across the northern Plains on Wednesday, while a separate wave of low pressure will move over the eastern third of the country.
"A strong area of low pressure will lift northeastward over the northern Plains and south central Canada. This system will interact with warm, muggy air over the central U.S. to initiate rain and thunderstorms over a handful of states. Strong to severe thunderstorms will be possible over the upper Midwest, the middle Mississippi Valley, the central Plains and the southern Plains,” Strenfel said. “Severe thunderstorms are forecast to develop over northern Oklahoma, Kansas, northwest Missouri, eastern Nebraska and southwest Iowa. These thunderstorms will be capable of producing large hail, dangerous straight line winds and isolated thunderstorms. Additionally, showers will linger over the Intermountain West. High elevation snow showers will be possible above 8,000 feet across the central and northern Rockies.
"Meanwhile, an onshore flow from the Gulf of Mexico will trigger isolated thunderstorms across the Gulf Coast and the southeast. To the north, a wave of low pressure is expected to usher rain across portions of the northern Mid-Atlantic and New England,” she predicted. “Out west, a ridge of high pressure will build over the eastern Pacific. This system will bring warm, dry conditions to the majority of the West Coast on Wednesday.”
Next-day gas prices on the West Coast were a hair lower, although major population centers were expected to experience above normal temperatures, and power loads and next-day prices were expected to be greater.
Wunderground.com forecast that the Wednesday high in Burbank, CA of 85 was expected to jump to 95 Thursday and reach a toasty 99 on Friday. The normal high in Burbank this time of year is 83.
San Diego's Wednesday high of 75 degrees was forecast to rise to 89 Thursday, before adding another degree Friday. The seasonal high in San Diego is 74. San Francisco's 81 high on Wednesday was seen making it to 83 Thursday and 85 Friday. The normal high in San Francisco is 73.
The California Independent System Operator forecast that peak load Wednesday of 33,742 MW would rise to 35,608 MW Thursday.
IntercontinentalExchange reported that next-day peak power at NP-15 rose $1.34 to $50.50/MWh and Thursday peak power at SP-15 gained $2.93 to $54.04/MWh.
Next-day gas prices on the West Coast were steady to slightly lower. At Malin Thursday, parcels eased a penny to $3.98 and gas at the PG&E Citygates was up a penny at $4.58. Deliveries to the SoCal Citygates fell 3 cents to $4.42 and gas at the SoCal Border eased 3 cents as well to $4.19. Deliveries to El Paso S Mainline eased 2 cents to $4.23.
Flow interruptions in the Great Lakes had little impact on pricing. "On September 30, 2014 ANR called a force majeure that will restrict the operating pressure of certain segments of the 0-100 Line and 1-100 Line. The event comes in response to a Corrective Action Order from the Pipeline and Hazardous Materials Safety Administration," said industry consultant Genscape. The order came after a failure of the 1-100 line near Benton Harbor, Michigan.
"Capacity on the SW Mainline will be reduced to 0.5 Bcf/d (a 0.15 Bcf/d reduction); St. John (W-E) will be reduced to 0.91 Bcf/d ( a 0.36 Bcf/d reduction); and the MLN (south end) will be reduced to 1.02 Bcf/d (a 0.61 Bcf/d reduction). As a result, ANR will be unable to deliver a portion of the firm primary at the affected segments. On Tuesday, flows at MLN (South End) and St. John (W-E) fell from their 14 day averages by 0.38 Bcf/d and 0.28 Bcf/d, respectively. Flows on the SW Mainline only fell by 0.01 Bcf/d from the 14 day average," Genscape said.
ANR has not said how long the operational capacity restrictions will last.
Forecasters reported the present hurricane season is on track to grab the title of least active since 1986. Wunderground.com meterologist Jeff Mastersreported that "The traditional busiest month of the Atlantic hurricane season, September, is now over, and we are on the home stretch. Just three weeks remain of the peak danger portion of the season. September 2014 ended up with just two named storms forming--Dolly and Edouard, [and] since the active hurricane period we are in began in 1995, only one season has seen fewer named storms form in September--1997, with Category 3 Hurricane Erika being the only September storm.
"Between 1995 - 2014, an average of 4.3 named storms formed in September. With only five named storms so far in 2014, this is the quietest Atlantic hurricane season since 1986 when we also had just five named storms by the beginning of October,” he said. “In terms of Accumulated Cyclone Energy (ACE), activity in the Atlantic up until October 1 has been only about 43% of the 1981 - 2010 average."
Natgasweather.com in its morning report expects periodic surges of cooler air especially at more northern latitudes. "With a cooler northern US pattern beginning to take shape, stronger heating demand should be expected over the coming weeks, especially for the Midwest into New England. There should be three distinct cool blasts to play out over the next 10 days, with each one getting slightly colder. They aren’t exceptionally cold, but should still be enough to keep the markets on edge as the pattern is playing out eerily similar to what occurred last winter.
"The only difference is the immediately eastern U.S. coastline will remain ahead of each cool blast for a period of time, allowing warm southerly winds to surge in. What’s important is a relentless barrage of cooler than normal Canadian weather systems should push fairly deep into the central and eastern US over the next two to three weeks and this should drive stronger than normal early season heating demand,” the website said. “In addition, California and portions of Texas, will remain quite warm and require some moderate cooling demand, leading to shrinking weekly builds following the next two."
For the moment, those expecting mild temperatures and a lack of any weather-driven impact are secure. The National Weather Service forecasts below normal heating degree days (HDD) for the week ended Oct. 4. New England is expected to see just 31 HDD or a stout 31 below normal and the Mid-Atlantic should only have to endure 13 HDD or 41 less than its normal tally. The greater Midwest from Ohio to Wisconsin is expected to experience 25 HDD or 32 below its seasonal norm.
Natgasweather.com is circumspect on the market. "We quite honestly don’t have a good feel for prices here as they’ve gained more than 30 cents over the past week and could warrant some profit taking. However, weather patterns look to remain at least moderately bullish through October 14, potentially longer, especially if cooler temperatures have any success pushing into high population Northeast cities, and this could be reason enough to continue to drive prices higher. In addition, today will likely bring some positioning going into tomorrow’s EIA weekly report, which is expected to bring in another much larger than normal build with estimates around 105-109 Bcf."
Last year 99 Bcf was injected, and the five-year average is for an 85 Bcf build. Kyle Cooper at IAF Advisors calculates a 106 Bcf increase and Ritterbusch and Associates is looking for a build of 99 Bcf. A Reuters survey of 24 industry analysts revealed an average 107 Bcf injection with a range of 95 Bcf to 120 Bcf.