Physical natural gas prices nationally rose on average by 8 cents Tuesday with Gulf points taking the lead. Great Lakes and eastern points were also strong, and at the close of futures trading, July had advanced 3.0 cents to $3.905 and August was 3.0 cents higher as well to $3.927. July crude oil gained 67 cents to $98.44/bbl.
An explosion and fire in Louisiana on Florida Gas Transmission (see related story) had some buyers working overtime to find supplies. “We are seeing about 18% cuts because of the explosion and reroutes,” said a Florida utility buyer. “Everyone gets cut pro-rata, and the flow through that compressor station went from 1.5 MMcf/d to 1.1 MMcf/d. They call it unscheduled pipeline maintenance, and it is going to add value to anything downstream of Compressor Station Number 9.”
He added that in the aftermarket, trading prices on FGT Zone 3 scooted higher, and it “will definitely be reflected in tomorrow’s trading. I resourced the amount of gas downstream in Zone 10 and went on the evening cycle and got storage gas from Southern Pines storage facility.”
Quotes for next-day gas on FGT Zone 3 added 11 cents to $4.12, and gas at Transco Zone 3 was quoted at $3.89, up 11 cents. At the Henry Hub, gas for Wednesday delivery was seen at $3.90, about 12 cents higher, and on Columbia Gulf Mainline, gas was $3.85, about 8 cents higher. On Tennessee 500 L, next-day gas came in at $3.91, 10 cents higher.
A Great Lakes marketer expressed very little interest in buying at what his company perceived to be high prices. “We are just balancing our customers and didn’t buy any gas today,” said a Michigan buyer. The buyer said temperatures may not hit 70 Tuesday, “but I noticed a 90 degree temperature for Sunday.”
The marketer said that although his company would begin filling storage for its customers, it was inclined to wait for lower prices before doing so.
Gas for delivery on Michcon gained 8 cents to $4.07, and deliveries to Consumers gained 9 cents to $4.15. Quotes at the Chicago Citygates rose by 9 cents to $3.95. On Alliance, next-day packages were quoted at $3.92, 7 cents higher.
At eastern points, next-day gas advanced about a dime as warmer temperatures were forecast. AccuWeather.com predicted that Tuesday’s high in New York City of 73 would rise to 77 Wednesday, 3 degrees below the seasonal norm. In Philadelphia, Tuesday’s 69 high was expected to jump to 80 Wednesday, also 3 degrees below the normal high.
Gas for delivery on Dominion rose 11 cents to $3.74, and deliveries to Tetco M-3 added 7 cents to $3.93. Gas bound for New York City on Transco Zone 6 gained 9 cents to $3.98.
Longer term, forecasts favor warmer temperatures by the end of the month. “Indications are the seemingly endless cool weather pattern from the Upper Midwest to the East will change toward the end of June, thanks in part to warm air coming from an unusual source: Alaska,” said AccuWeather.com meteorologist Alex Sosnowski.
“Temperatures have challenged record highs over portions of Alaska in recent days. The pattern producing that warmth over The Last Frontier will shift toward the southeast. A river of strong winds high in the atmosphere, known as the jet stream, will push the warm air farther south and east over the Canada Prairies as the month progresses. As this happens, Alaska will trend cooler.
“Toward the end of June, a zone of high pressure at most levels of the atmosphere will expand over the Central states, allowing temperatures to trend upward over much of the nation.”
Traders see market direction for the moment determined by the weather. Addison Armstrong of Tradition Energy sees the market “continu[ing] to rebound on signs of strengthening seasonal demand fundamentals after falling to a three-month low last week. Gas prices [Monday] surged 4.8% to a seven-day high at $3.813 as revised forecasts for hot weather and increased cooling demands across the Midwest and Northeast later this week put an end to a three-week, 14% selloff. Weather forecasts, after the next couple days of normal to below-normal temperatures across the Northeast and Midwest, have edged warmer since [Monday] for the latter part of June and the early part of July. Forecasts for Texas and the Southeast are little-changed from [Monday], with normal to below-normal temperatures expected during the coming weeks.”
For now, Tropical Depression Two remains well beyond any U.S. Gulf infrastructure as it works its way west through southernmost Mexico. The National Hurricane Center (NHC) at 5 p.m. EDT Tuesday reported it moving to the west-northwest at 10 mph with maximum sustained winds at 30 mph. It added that it expected the system to move into the Bay of Campeche Wednesday night.
Analysts don’t see much additional follow-through off the weather. “Although updates within the six-14 day views are favoring above-normal patterns mainly across the northern half of the continental U.S., deviations from normal don’t currently appear sufficient to push nearby futures above $3.95 resistance without major assistance from Thursday’s storage release,” said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning note to clients. “We will further suggest that some offset will be provided by expected cool temperatures across Texas through the rest of this month. And as far as the storm factor is concerned, some development off of Mexico doesn’t look like a significant threat at the present time. So while some additional advances ahead of Thursday’s EIA release are certainly possible, we don’t expect the advances to carry much more than 6-7 cents off of [Monday’s] settlement.”
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