Weak guidance from Tuesday’s screen kept almost all cash points headed lower on Wednesday despite indications that the 2009 Atlantic hurricane season might soon arrive.
Prices were down across the country for a fourth consecutive day with declines along the Gulf Coast and Midcontinent mostly in the 10-20 cent range while the Northeast and the West saw a number of points shaving more than 20 cents.
“We really weren’t doing a lot of business on the day, but you’d have to be blind not to notice the overall national weakness in cash market values,” said a Midwest trader. “I just don’t think the hot weather is there in the Northeast as evidenced by the spread from the Henry Hub to that region. I also think the weak market is a function of where the Nymex has moved down to. I can’t see anything turning around this streak of weakness in the near-term. It is not a good time to be bullish. I think we’ll see a little more of a drop in values unless there is a big storm or an explosion somewhere.”
Wednesday’s decline in cash points surely fed off of Tuesday’s 10-cent drop in September natural gas futures values. Heading into Thursday’s trade, market traders will have similar bearish news as the front-month futures contract on Wednesday dropped another 6.2 cents to $3.479.
Natural gas market watchers are also keeping an eye on the tropics and on what lies ahead in the Energy Information Administration’s natural gas storage report, due Thursday morning for the week ending Aug. 7.
AccuWeather.com meteorologists noted that August and September are typically the most active months of the hurricane season, so it is no surprise that the activity is heating up this week. “Regardless whether or not Tropical Depression Two becomes a full-fledged storm, the next wave coming off Africa appears at this time that it will,” said Meghan Evans, a meteorologist with AccuWeather.com. “Computer models are indicating that this disturbance could eventually become a significant storm in the central Atlantic and could pose a threat to the East Coast of the United States in about 12 days.”
AccuWeather.com Expert Senior Meteorologist John Kocet added that it only takes one storm in the right place at the right time. “It doesn’t matter a hill of beans that no tropical storms have come to the plate so far,” he said. “If the next batter connects for a home run, coastal populations can lose big time.”
The Midwest trader said the “awakening” of the 2009 Atlantic hurricane season could push some values higher — eventually. “It looks like there are a few things stirring down south, but it is still a little early to tell,” he said. “It’s kind of like the impending winter heating season. You know winter is in the offing, but you’re not going to buy for the season yet because it is too early. Same with storms. Obviously something is going to happen with Tropical Depression Two or one of its friends, but it is too early to make a move yet.”
Turning attention to the country’s natural gas storage situation, the trader noted that the oversupplied status has not changed from the past few months. “The storage situation is still really bearish,” he said. “Nothing has changed on that front unless a cavern somewhere is leaking. Thursday’s report for the week ending Aug. 7 could be mildly interesting because of the few hot days last week in the Northeast that had people pulling gas out of storage on inter-day and next-day time-frames. We may not see as large of an injection as some anticipated.”
Bentek Energy said Wednesday afternoon that its flow model is indicating an injection of 67 Bcf, which would bring stocks 8.7% above the five-year high and 19.8% above the five-year average. The expectation includes a 52 Bcf injection in the East region and additions of 12 Bcf and 3 Bcf in the Producing and West regions, respectively.
The research firm noted that records continue to fall. “Stocks in the Producing region are at an all-time high; the stocks in the West are at a record level for the month of August, and the stocks in the East are only 60 Bcf off of the previous record for August,” Bentek said in its weekly storage note. “If injections for the rest of the [season] are in line with the five-year average, then stocks will end the season at a new record inventory level [of] over 3.9 Tcf, 355 Bcf above the previous record level of 3.5 Tcf.”
The number revealed Thursday morning at 10:30 a.m. EDT will be compared to last year’s 51 Bcf build and a five-year average injection of 42 Bcf.
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