The cash market rebounded by generally moderate amounts at most points Monday. The gains were attributed to heating load in northern market areas, the return of industrial demand from its usual weekend slump, and to some degree on working off imbalances accrued over the weekend.
With an occasional flat point surfacing here and there, Monday’s upticks tended to range from a couple of pennies to nearly 30 cents. A majority were about 15 cents or less.
Heating load stretched into some parts of the South that are experiencing lows in the 30s and 40s. However, temperatures will remain pretty comfortable in the rest of the South, primarily Florida and the lower Mississippi Valley, according to The Weather Channel. And some moderation of thermometer levels is due in the North over the next few days.
The West combined some of the smallest and largest price increases Monday despite mostly negative market conditions. For instance, the Southern California border jumped about a quarter despite SoCalGas extending Monday’s high-linepack OFO through at least Tuesday. But CIG was barely able to edge 2 cents higher after announcing it would implement a Strained Operating Condition notice for its system Tuesday (see Transportation Notes) because of high storage levels and warmer than expected market-area weather jeopardizing its ability to handle positive imbalances.
Kern River said it was experiencing high linepack in all segments, while PG&E discontinued Tuesday a high-inventory OFO that had been in place Sunday and Monday.
There was some doubt about whether the cash price firmness that began the week was sustainable. A Northeast trader said part of Monday’s mild rebounds resulted from people having to make up weekend imbalances because the weather had gotten colder than they expected. However, the region is predicted to get a little warmer again over the next couple of days, so she didn’t expect cash increases to last much longer.
But a late screen upturn Monday afternoon for an eventual daily increase of 26 cents, after the December gas contract had traded in the red during cash business in the morning, might result in some patches of cash firmness Tuesday, another source contended. He was unaware of any news event to explain the futures rally, so he assumed it was in reaction to crude oil’s major recovery from a low of $45.25/bbl to end Monday down only 45 cents at $46.87.
A Midwest marketer said her region had experienced chilly but fairly seasonable weekend temperatures that carried over into Monday, although overnight lows were rising a bit from recent readings in the mid 20s. “It’s definitely November in the Midwest, but we’ve seen very little snow yet,” she added.
The marketer said her company didn’t buy any gas for Tuesday flow, hoping that moderating weather toward midweek would bring lower prices with which to replenish customers’ supplies by then. So far it’s looking like the cash market this week may be able to avoid the huge price volatility of the previous week, she said.
The long-term weather outlook was growing a little more bearish after the National Oceanic and Atmospheric Administration said it expects El Nino conditions in the Pacific Ocean to keep this winter warmer than average weather in most of the West and over the northern and central Great Plains. The report prompted one source to quip that El Nino “is Spanish for lower gas prices.” However, NOAA’s Climate Prediction Center also said it expects cooler than average temperatures from December through February in the Gulf Coast, Southeast and Mid-Atlantic.
Analyst Thomas Driscoll of Lehman Brothers expects the first net storage withdrawal of the heating season to be announced for the week ended Nov. 12, and he estimates its volume at 15 Bcf.
The Minerals Management Service said Monday there was no change over the weekend from the 679.16 MMcf/d reported Friday as being shut in offshore due to Hurricane Ivan two months earlier. The federal agency also said Monday it is cutting back its issuance of the “Hurricane Ivan Evacuation and Production Shut-in Statistics” report to twice a week. The reports will be posted on the MMS web site (https://www.mms.gov/) at 2 p.m. EST on Mondays and Thursdays. “In the last few days there has been improvement in the production numbers and this appears to be a trend that will continue with incremental movement over the next several months,” the MMS announcement said. “Over a period of two months, production shut-in[s] dropped considerably to 200,871 barrels of oil and 679.16 MMcf of gas. Currently in the Gulf of Mexicog (GOM), operators are producing back at 88.18% of pre-storm oil production and 94.48% of pre-storm gas production.”
Chris Oynes, MMS regional director for the GOM OCS Region, said during an Interior Dept. briefing Monday on the long-term outlook for Gulf production (see separate story) that he expects Hurricane Ivan-ravaged production to return to normal levels in about “another five months or so.”
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