After logging almost a complete week of price average increases, the natural gas cash market was at it again on Monday for Tuesday delivery with most points at locations across the country recording gains of between a nickel and 15 cents.
While price average increases populated all points, some of the largest additions were in the eastern and Rocky Mountain portions of the country where 13-cent to 16-cent increases were not uncommon. The gains in the Northeast were a little surprising considering the Sable Offshore Energy Project in eastern Canada came back online Sunday after an extended planned maintenance outage (see Transportation Notes).
Some of the cash market strength could be attributed to the futures screen’s recent behavior. Even though June futures declined by 2.7 cents to $4.312 on Friday, the contract still finished last week 29.7 cents higher than the previous week’s close. Cash market values could be headed even higher Tuesday after June futures on Monday added 8.6 cents to $4.398 (see related story).
Cash prices on the West Coast increased by similar amounts to the rest of the country as some spots saw some residual heating demand. “The loads were a little bit higher in Northern California on Monday,” the West Coast trader said. “It was pretty cool today, so I think we’re seeing some heating loads still in the East Bay and Tahoe regions. Other places are pretty flat. Spreads in the south have been maintaining, but they actually widened out from the north Monday.”
The trader said the screen is basically leading cash higher here. “I think there is a lot of short-covering going on in June futures. There is quite a large net short position open,” he told NGI. “On the other side, I think a lot of people are looking at an opportunity to lock in low prices if they have injection space. They’re really trying to get in front of summer. Some analysts are also saying that the recent run-up is over fear of an overly active Atlantic hurricane season, but I’m a little skeptical myself due to the significant amount of gas we have right now. Until I see something telling me otherwise, I’m not believing that we are tight.”
The recent run of strength in cash market prices becomes a little hard to believe when taking current natural gas fundamentals into consideration. A team of Raymond James & Associates analysts headed up by J. Marshall Adkins said Monday they believe the U.S. gas supply situation is being largely understated. Adkins noted that while the industry consensus is that domestic gas supply growth this summer will show less than 1 Bcf/d of year-over-year (y/y) growth, his team believes that y/y gas supply growth will be closer to 4 Bcf/d this summer (see related story). By connecting the dots, they wrote, the “massive supply trends become pretty obvious.”
In a separate analysis, Brad Smith of U.S. Energy Services Inc. wrote Monday that “absolute” storage levels are at record levels for this time of year (2.1 Tcf). “Looking forward, current production levels will likely overwhelm a near-term reduction in the y/y surplus to build end of season storage equal to or modestly beyond last year’s record (3.8 Tcf),” Smith said.
©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2020 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |