Cash prices moved up for the third day in a row Wednesday, posting gains of 5-50 cents on hot weather, strong power generation loads for airconditioning and rising futures prices. The lowest cash market locations in the Rockies, such as CIG and Northwest Pipeline, moved out of the $4s and back into the low $5s for the first time in about a week.
Meanwhile on the topside of the market, New York and Algonquin citygates were both up more than 40 cents and averaged in the mid $6.60s, and the daily high at Iroquois Zone 2 broke $7.
Near-month gas futures added 14.9 cents to close at $5.782/MMBtu, while August crude oil ended the day up 76 cents at $74.95/bbl.
“The Henry Hub was only about 10 cents behind the screen today; it had been about 10-30 cents back,” said a Northeast marketer. “We saw New York basis get as wide as $1.00 compared to 65-75 cents on Tuesday.
“It’s hot and humid and power generation load is building. That’s where the big jump in demand is coming from. I think some gas-fired generation that may have been idled is now on. It’s supposed to stay hot in New York until next Tuesday so I wouldn’t expect the normal weekend price dip. New England prices weren’t as high as New York Wednesday but Iroquois Zone 2 was up very strong because of generation demand,” he said.
Above normal temperatures are being felt across large portions of the nation and are expected to stick around for a while. Triple-digit highs are expected to scorch the middle of the country and the Southwest on Thursday. One hundred degree marks will be reached in South Dakota, Oklahoma, Texas, Arizona and California.
“Broiling, perhaps record, heat will be the headline story for the Great Plains and Upper Midwest tomorrow,” the Weather Channel said on Wednesday. “Highs will be predominately in the 80s and 90s [in the South], although most of western Oklahoma and western Texas will be seared by readings soaring over the century mark,” it said. A heat advisory is posted for parts of southwestern Arizona where Phoenix will broil in 113-degree heat Thursday.
Arizona Public Service’s Palo Verde 1 nuclear plant near Phoenix was back up to 90% of capacity (1,243 MW) on Wednesday after being at 65% on Tuesday for testing. Nevertheless day-ahead on-peak Palo Verde power prices were up more than $8 on IntercontinentalExchange to $66.56/MWh. Day-ahead power prices rose nearly across the board Wednesday.
“Intrastate Oklahoma [gas] was real strong today, higher than TexOk and the east side,” said a local producer. “The intrastates were really burning big time. Demand was very high. El Paso Permian was strong so we could not get much gas coming into Oklahoma from the West. When that western gas dries up, you have a problem meeting demand. Oklahoma is definitely a net importer right now. A lot of Oklahoma gas normally goes to the Midwest, but it has been staying home. Cash is going to remain strong for a while.”
Any downward pressure in the near term probably will come from another look at high storage levels. Bentek Energy is forecasting an 83 Bcf injection in Thursday’s weekly gas storage report from the Energy Information Administration. A Reuters survey of 22 gas market observers showed an average weekly gas storage prediction of 76 Bcf for the week ended July 7 compared to the injection in last week’s storage report of 73 Bcf for the week ending June 30.
The National Oceanic and Atmospheric Administration said there were 70 cooling degree days last week, which was five more than the prior week and two more than normal.
Working gas levels in storage remain about 29% (591 Bcf) above the five-year average, but Citigroup natural gas futures analyst Tim Evans noted that the year-on-five-year average storage surplus has been declining for seven consecutive weeks since posting a 722 Bcf peak on May 12. “We think that trend will be continued in Thursday’s report with net injections of roughly 75 Bcf…,” he said. About 92 Bcf of working gas was injected during the week ending July 8 last year.
“This week’s demand also looks supportive,” said Evans, “and if cooling degree day accumulations mount as forecast, we think the following report could show and even lower 50 Bcf net rise.
“While the ongoing storage trend is constructive, we think the hurricane season will ultimately provide the spark for a more significant intermediate term rally,” he said. “The bears may have been emboldened by the relative quiet, with just one named storm so far this season, but this might prove a literal ‘calm before the storm.'”
Frontier Weather noted Wednesday that the active 2004 hurricane season’s first named storm didn’t show up until July 31. The 2002 hurricane season only saw one named storm in July and the three seasons prior to that year didn’t have any named storms in July yet all those seasons were very active.
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