Cash prices were down a fairly consistent 3-10 cents at the great majority of points Friday in a very slow, quiet day of pre-weekend trading. Mild temperatures across the country — except for Colorado, where a snowstorm dumped a couple of feet of snow — kept heating and cooling demand to a minimum, plus the industrial load drop over a weekend played a role.
Despite the Rockies chill, that was where most of the losses greater than a dime occurred, with CIG and Cheyenne Hub dropping about 15 cents and 20 cents respectively. A marketer noted that Colorado weather was due for a huge turnaround; he was hearing that Denver temperatures would be approaching 60 degrees by Sunday.
Although trading is likely to pick up Monday with the official start of May bidweek, most observers don’t see much price movement on the horizon. May futures slipped a nickel Friday to $5.571 after inching higher on each of the previous three days.
“Weather is merely seasonal across the Northeast for the weekend. Power loads have been higher than I thought, so there must be some gas-fired use going on because of seasonal maintenance. But I see no major incremental pull to support cash prices,” said a Northeast marketer. “In the Northeast, you are seeing basis trades anywhere between 35-50 cents over the Gulf and that’s basically normal for this time of year.”
Northeast prices were in the mid $5.90s on average compared to premium Gulf Coast locations in the low to mid $5.50s.
“LDC and power generation loads are way off for the weekend,” said a Gulf Coast producer. “But April is the deadest month of the year. We’ve seen a tight trading range all week in cash and even on the Nymex. But it doesn’t seem like the market wants to fall from here. Every time it turns and goes south, it finds support and bounces back. I think it’s still trying to find direction, but there are more fundamental reasons for it to remain firm or go up than there are for it to come down.”
A West Texas trader said Waha quotes a few cents over $5 provided a storage injection opportunity. “There’s some injection demand. Prices are making sense to put it in before next month. April is still the cheapest month. If you have storage [space], you really want to put it in now instead of wait until May. Waha basis for May is minus 42.5 [cents], so if futures is $5.59 [at that point], that leaves you at $5.165 for May at Waha and prices right now for April are around $5.03-04.”
A Midcontinent marketer was thinking similarly, saying, “We saw NGPL TexOk get pushed down to 20 [cents] back of the screen, and that made people see a storage buying opportunity” with May looking about a nickel higher than where swing gas was priced. The aroused buying interest brought TexOk back up a couple of pennies late, he added.
Weekend OFOs in California that some traders had feared did not materialize. PG&E had called a high-linepack on Thursday and that scared a lot of people because of the tight tolerance (4%), one trader said. Apparently that OFO was effective, because on Friday PG&E was reporting that projected linepack had dropped back to just above its target minimum over the next few days.
On the other side of the coin, an OFO-like Overage Alert Day notice by Florida Gas Transmission due to temperatures heating up in its market helped keep field prices into the pipe among the Gulf Coast’s highest.
For a Calgary-based producer, “The big question for us this week was how [Westcoast] Station 2 compared to Alberta. The difference between Malin and the Rockies and the hydro situation are the big factors that come into play in Sumas pricing. This month it has been okay. Malin has been strong. I think the basis may widen at Sumas because power prices are not strong in the Pacific Northwest for May. It doesn’t bode well for large consumption of gas by big utilities down there. With May being a slower month and adequate hydro, the pricing is just not going to work to run the gas-fired generators very often.
“We’ve been bringing over a lot of BC [British Columbia] gas onto Alliance rather than taking it to Station 2 or to Sumas. It’s been going that way because of the weakness in the Pacific Northwest and at Station 2. It’s been a spread of 15-30 cents between AECO and Station 2. If you are a BC shipper, that’s a bad spread. AECO has been pulling gas away from British Columbia and the Pacific Northwest. There’s just not enough demand at Station 2.”
The producer also noted that Unocal Canada’s 48 Bcf Aitken Creek storage field in British Columbia was taken down for maintenance last week, and “that put a little bit more supply on the [Westcoast] system. Next week we might see some tightening up at Station 2 as that gas starts to go back into storage rather than being sold on the open market.”
Citigroup’s Kyle Cooper said his initial estimation for the upcoming storage report is “for something near 80 Bcf.”
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