Despite full working gas levels in storage in many locations across the nation and widespread high linepack operational flow orders on many pipelines, gas prices went up on Tuesday between 30 cents and $1, depending on the location, largely in response to the 45-cent increase in futures prices Monday and the huge gap between current cash and futures. Forecasts in some areas also show temperatures slowly returning to more normal levels over the next week.
“Cash is a little stronger today, but nothing exceptional given how far back it is [from futures],” said a Canadian producer. “Henry is about $2.60 behind futures right now and Chicago’s average today will probably be in the $7.60s which is at least $4.25 back from the screen. Remember the Chicago index this month was $12.89. The cash market just came unglued. It now seems to be trying to get reattached, but it’s going to take a lot more cold than this to do it.”
Chicago temperatures are expected to approach normal next week after being well above normal over the last week. “There’s some cold in the 11- to 15-day forecast. By the middle of the month, some of the market areas will be cooler — possibly below normal, but nothing crazy, maybe 40 for a high in Chicago sometime next week. Today it’s still 60 degrees but we were seeing 70s last week. Normal is 48.”
He said any gas that can exit Chicago is holding a small premium to supply stuck at the gate. “Most of the storage in the Midwest is full right now. You can do the Midwestern shuffle, the ANR shuffle or the Vector shuffle. You do anything you can, but most of the storage everywhere is full. And anything you try is a risk; you are taking your chances on IT and what you may have to do with it when it doesn’t work.”
Temperatures across most of the nation remained 10-20 degrees above normal on Tuesday. The only region with below normal temps was the Pacific Northwest with highs in the upper 40s. Highs Tuesday in the Southwest, Midcontinent and Southeast were in the low 80s or high 70s.
The nearly full storage situation nationwide continued to trigger operational flow orders (OFOs) on many pipelines. “Once the storage is full, they have to start to withdraw and that is exacerbating the problem,” the Canadian producer noted. “MichCon has an OFO. Peoples has a cap on deliveries.”
Because of the lack of demand on its system Transco put an operational control provision in place on Saturday with an OFO warning. “The OFO will be quite expensive and that’s causing a lot of the Transco-Gulf positions to get really discounted,” said a Northeast marketer. The pipeline granted shippers a little relief on Tuesday allowing them three more days to mitigate their imbalance positions to a 5% tolerance. Shippers now have until Friday.
Tennessee Gas Pipeline also issued a high linepack OFO in its Zone 0. And Texas Eastern complained that shippers continue to leave gas on its system. Tetco has force balanced long pools in South and East Texas because it has limited ability to absorb makeup imbalance gas. The same situation has occurred on Algonquin Gas Transmission in New England and East Tennessee Gas in the Southeast. East Tennessee issued a force balancing OFO alert for parties exceeding a 5% tolerance between receipts and deliveries.
“No one has anywhere to stick this gas with storage almost full,” the Northeast marketer said. “With the return of somewhat normal temperatures up here in the Northeast, and the Nymex run last night, cash did come back a little compared to yesterday. New York came in about the $8.60s and ended the day about $9.25. But New York is actually still lower than Henry Hub. It’s been that way a couple days now. There’s just been no demand in the Northeast.” The bidweek index for Transco Zone 6 New York was $15.24.
The only thing holding up markets in the East currently is the continuing problems in the Gulf of Mexico. The Minerals Management Service (MMS) said Tuesday that shut-ins fell 358.63 MMcf/d in one day, which is a pretty significant decline. About 4,122.90 MMcf/d of offshore Gulf gas production remains offline. MMS said 66 companies reported 195 platforms and five rigs still evacuated. Cumulative gas shut-ins total 418,377 Bcf.
However, the market is likely to get another solid storage injection in this week’s report, followed by a potential net increase in the report next week. “This will have something of a double impact, padding the 79 Bcf year-on-five-year average storage surplus and also eating into the effective length of the heating season itself,” noted Tim Evans of Thompson Financial in a report to clients.
Citigroup’s Kyle Cooper said he is expecting a 41-51 Bcf injection in this week’s gas storage report for the week ending Nov. 4. That will compare to a 34 Bcf injection during the same week last year and a five year average build of 19 Bcf. With a 50 Bcf storage injection, working gas levels would rise to 3,218 Bcf.
High storage levels are affecting gas pipeline flows across the nation. In the Midcontinent, CenterPoint Energy Gas Transmission issued an operational alert, warning shippers and pool managers that they will be penalized if they incur new long imbalances.
In the West, Colorado Interstate Gas issued an OFO for Wednesday’s gas day because of continuing warm weather in its market area. CIG said it does not have the ability to absorb significant imbalances. Because of high storage inventory levels, the pipeline has limited ability to handle storage injections in excess of each storage shippers available daily injection quantity or inventory levels above maximum available capacity.
Making matters worse in the Rockies, Questar noted that its interruptible storage services shippers have only 20 days left to withdraw about 1.8 Bcf of gas from its storage facilities.
On the West Coast, Pacific Gas & Electric’s California Gas Transmission System declared a stage 2 systemwide high inventory OFO with a 5% tolerance for Wednesday, expecting linepack to rise above the critical 4,500 MMcf/d level to 4,569 MMcf/d Wednesday and possibly 4,873 MMcf/d by Friday.
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