After climbing a couple of cents each day for the first four days of the week, cash point averages across the board gave all of the premium back and then some as a vast majority of prices dropped by more than 20 cents on Friday.
The weakness was to be expected following the prior-day action in the futures arena. On Thursday October natural gas plummeted 16.1 cents following the news that 87 Bcf was injected into underground storage for the week ending Sept. 9.
Whether it was the East (Transco Zone 6-NY down 26.43 cents, according to IntercontinentalExchange data), the Gulf Coast (Henry Hub down 19.49 cents), the Midcontinent (Chicago Citygates down 23.25 cents), the Rockies (CIG Mainline down 24.41 cents) or the West Coast (PG&E Citygate down 20.71 cents), the deal action on Friday seemed to reveal what many in the industry already knew: there is a lot of gas; the tropics are quiet; and winter is still a ways off.
“Mild autumn weather and robust domestic production have contributed to a supply build, outstripping demand,” according to a recent research note from the Deloitte Center for Energy Solutions (DCES). “As the hurricane season draws to a close and temperatures cooled across the country, consumption registered a modest decline of 1.9% over last week. The shale boom has contributed to a significant increase domestic dry gas production, which is 7.5% above this time last year. The week’s production gain was further augmented by a 4% increase in Canadian imports averaging 5.2 Bcf/d.”
Commenting on the significantly lower cash averages for weekend and Monday delivery, Steve Blair, a broker for Rafferty Technical Research in New York, said a number of factors were likely in play. “Heading into a weekend, when historically a lot of industrial gas demand falls off, I’m not surprised cash prices declined some. Add to that Thursday’s storage figure, which the markets digested as bearish, and the fact that the tropics have gone quiet storm-wise, and I think people are starting to see that there is no reason for prices to be held up.”
Compounding Thursday’s screen decline, front-month futures dropped even lower on Friday, leaving cash traders further bearish influence when they walk in to the office on Monday. October futures dipped another 6.9 cents to close out Friday’s regular session at $3.809.
On the weather front, recently upgraded Hurricane Maria Friday afternoon was off the coast of Newfoundland and the only other disturbance on the board was a low-pressure system in association with a tropical wave that was “several hundred miles” southeast of the Cape Verde Islands, according to the National Hurricane Center. Forecasters on Friday afternoon gave it a 10% chance of becoming a tropical cyclone by Monday.
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